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A survey of the effect of trade openness size on inflation rate in Iran using ARDL

Author

Listed:
  • Mostafa SALIMIFAR

    (Ferdowsi University of Mashhad, Iran)

  • Mohammad Javd RAZMI

    (Ferdowsi University of Mashhad, Iran)

  • Zahra TAGHIZADEGAN

    (Ferdowsi University of Mashhad, Iran)

Abstract

The purpose of this study is to examine the relationship between trade openness size and inflation rate in Iran using ARDL method for the period 1973 to 2010. There is a robust negative relationship across countries, first documented by Romer (1993), between a country’s openness to trade and its long-run inflation rate. Given that Iran’s economy is dependent on oil incomes and as these incomes influence on inflation, non-oil trade openness has been used in this study. The results show that this variable has negative significant effect on inflation through this period. Other control variables i.e. Growth of Liquidity, exchange rate and output gap affect inflation in the expected directions.

Suggested Citation

  • Mostafa SALIMIFAR & Mohammad Javd RAZMI & Zahra TAGHIZADEGAN, 2015. "A survey of the effect of trade openness size on inflation rate in Iran using ARDL," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(604), A), pages 143-154, Autumn.
    • Handle: RePEc:agr:journl:v:xxii:y:2015:i:3(604):p:143-154
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    References listed on IDEAS

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    1. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 869-903.
    2. Ravi Batra, 2001. "Are Tariffs Inflationary?," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 373-382, August.
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    4. repec:bla:reviec:v:9:y:2001:i:3:p:373-82 is not listed on IDEAS
    5. Jafari Samimi, Ahmad & Ghaderi, Saman & Sanginabadi, Bahram, 2011. "Openness and Inflation in Iran," MPRA Paper 52408, University Library of Munich, Germany.
    6. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October.
    7. Tahir Mukhtar, 2010. "Does Trade Openness Reduce Inflation? Empirical Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(2), pages 35-50, Jul-Dec.
    8. Sachsida, Adolfo & Carneiro, Francisco Galrao & Loureiro, Paulo R. A., 2003. "Does greater trade openness reduce inflation? Further evidence using panel data techniques," Economics Letters, Elsevier, vol. 81(3), pages 315-319, December.
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    11. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, vol. 42(3-4), pages 327-347, May.
    12. William Gruben & Darryl Mcleod, 2004. "The openness-inflation puzzle revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 11(8), pages 465-468.
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    Cited by:

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