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Inflation And Openness: Empirical Evidences From Iran (1965-2010)

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  • HAMI Mahyar

    (Mazandaran University of Science & Technology, Babol, Iran)

Abstract

The aim of this paper is to examine the causal relationship between inflation and openness in Iran emphasizing long-run relations during 1965 - 2010. To do so, I used growth rate of the consumer prices as the indicator of inflation and total exports and imports as a percentage of GDP to measure trade openness. Then I applied Vector Error Correction Model to estimate the proposed model. The results show that there is a one-way causal relationship from inflation to openness in Iran during the observation period and inflation has a positively significant impact on trade openness, so that 1% increase in inflation rate has led to approximately 0.12% increase in trade openness in the next period and 0.19% increase in trade openness in the next two period.

Suggested Citation

  • HAMI Mahyar, 2014. "Inflation And Openness: Empirical Evidences From Iran (1965-2010)," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 9(2), pages 27-32, August.
  • Handle: RePEc:blg:journl:v:9:y:2014:i:2:p:27-32
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    References listed on IDEAS

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    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, pages 35-50.
    8. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, pages 203-233.
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    10. Dudley Cooke, 2010. "Openness and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2-3), pages 267-287, March.
    11. Jafari Samimi, Ahmad & Ghaderi, Saman & Hosseinzadeh, Ramezan & Nademi, Younes, 2012. "Openness and inflation: New empirical panel data evidence," Economics Letters, Elsevier, vol. 117(3), pages 573-577.
    12. Daniels, Joseph P & Nourzad, Farrokh & Vanhoose, David D, 2005. "Openness, Central Bank Independence, and the Sacrifice Ratio," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 371-379, April.
    13. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, pages 327-347.
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