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Inflation and Trade Openness Revised: an Analysis Using Panel Data

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  • Adolfo Sachsida
  • Mário Jorge Cardoso de Mendonça

Abstract

In this article we estimate the relationship between inflation and trade openness [e.g.,Romer (1993)] using modern panel data techniques. The advantage here is that weare able to explicit test the hypothesis proposed by Terra (1998) that the negativerelationship between openness and inflation is due to severely indebted countries inthe debt crisis period. The econometric results give support to Romer (1993)showing that the negative relationship between inflation and openness are neitherrestrict to a subset of countries or a time period.

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Bibliographic Info

Paper provided by Instituto de Pesquisa Econômica Aplicada - IPEA in its series Discussion Papers with number 1148.

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Length: 22 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:ipe:ipetds:1148

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  1. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  2. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  3. Bilginsoy, Cihan, 1993. "Inflation, growth, and import bottlenecks in the Turkish manufacturing industry," Journal of Development Economics, Elsevier, vol. 42(1), pages 111-131, October.
  4. Cavallari, Lilia, 2001. "Inflation and Openness with Non-Atomistic Wage Setters," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 210-25, May.
  5. Maria Cristina Terra, 1995. "Openess and inflation: a new assessment," Textos para discussão 339, Department of Economics PUC-Rio (Brazil).
  6. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  7. Temple, Jonathan, 2002. "Openness, Inflation, and the Phillips Curve: A Puzzle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 450-68, May.
  8. Hardouvelis, Gikas A., 1992. "Monetary policy games, inflationary bias, and openness," Journal of Economic Dynamics and Control, Elsevier, vol. 16(1), pages 147-164, January.
  9. M. F. Bleaney, 1999. "The Disappearing Openness-Inflation Relationship," IMF Working Papers 99/161, International Monetary Fund.
  10. David Romer, 1991. "Openness and Inflation: Theory and Evidence," NBER Working Papers 3936, National Bureau of Economic Research, Inc.
  11. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  12. Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
  13. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  14. Christopher Bowdler, 2003. "Openness and the Output-Inflation Tradeoff," Economics Papers 2003-W04, Economics Group, Nuffield College, University of Oxford.
  15. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, vol. 42(3-4), pages 327-347, May.
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