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The Asymmetric Impacts of Economic, Social, and Political Globalization on Inflation

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  • Hande Aksoz Yılmaz

    (Kirsehir Ahi Evran University, Economics Department, Kirsehir, Turkiye)

Abstract

This study aims to investigate the asymmetric effects of globalization on inflation. While theoretical and applied studies emphasize the negative effect of globalization on inflation, they explain this through market mechanisms and efficiency. In an open economy, the need for seigniorage incomes decreases, as the incomes obtained as a result of trade will increase. An economy that increases foreign trade revenues needs less seigniorage revenues. Foreign trade income will result in a decline in inflation if an increase in the money supply is the primary cause of inflation. Romer (1993) emphasizes that the other channel that reveals the negative effect of globalization on inflation is the market mechanism. In this instance, the presence of foreign currencies that can take the place of the national currency in an open economy helps to lower inflation. Also, inflation is reduced by economic openness because it allows for specialization and economies of scale. This study uses the annual data of Turkey’s consumer price index, GDP per capita, general government final consumption expenditures (% of GDP), globalization index-KOF (economic, political, and social globalization indexes), and exchange rate variables for 1970-2021. The non-linear autoregressive distributed lags (NARDL) estimation method is used in the analysis of the asymmetric effect of different components of globalization on inflation. The findings reveal that economic and social globalization has an asymmetric effect on inflation; however, also revealed is the non-significance of the asymmetrical effect of political globalization on inflation.

Suggested Citation

  • Hande Aksoz Yılmaz, 2024. "The Asymmetric Impacts of Economic, Social, and Political Globalization on Inflation," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 11(1), pages 63-74, January.
    • Handle: RePEc:ist:iujepr:v:11:y:2024:i:1:p:63-74
    DOI: 10.26650/JEPR1349411
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    References listed on IDEAS

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    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • F6 - International Economics - - Economic Impacts of Globalization
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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