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The Relationship between Trade Openness and Inflation in Turkey

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  • Rana Atabay

    (Istanbul Medipol University)

Abstract

Both in Turkey and in the world in 1980 was a year of major structural transformations. Globalization has been accelerated in this time and countries have implemented some liberal policies for opening borders to foreign capital. Economies began to be led by export-oriented industrialization and liberalization policies after 1980 and these policies continue since then. Turkey is one of these countries that began liberalization after 1980. While decreasing trade barriers exerts a downward pressure on prices trade liberalization represents a structural break. This study aims to examine the relationship between trade openness and inflation over the period 1980-2011 for Turkey by using OLS method. The proportion of foreign trade volume (exports plus imports) to GDP and real exchange rates are used as measures of trade openness besides inflation rate. As a result of the study, it has been determined that there was a negative correlation between trade openness and inflation rate for the dedicated years in Turkey. The effects of crisis and election years in Turkey have been also tested and found statistically insignificant. Key Words: Trade Openness, Inflation, Turkey

Suggested Citation

  • Rana Atabay, 2016. "The Relationship between Trade Openness and Inflation in Turkey," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 5(3), pages 137-145, April.
  • Handle: RePEc:rbs:ijbrss:v:5:y:2016:i:3:p:137-145
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    References listed on IDEAS

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    1. William Gruben & Darryl Mcleod, 2004. "The openness-inflation puzzle revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 11(8), pages 465-468.
    2. Mia Mikic & John Gilbert, 2007. "Trade Statistics In Policymaking - A Handbook Of Commonly Used Trade Indices And Indicators," STUDIES IN TRADE AND INVESTMENT, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), number tipub2491, June.
    3. Batra, Ravi, 2001. "Are Tariffs Inflationary?," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 373-382, August.
    4. Richard W. Evans, 2007. "Is openness inflationary? Imperfect competition and monetary market power," Globalization Institute Working Papers 01, Federal Reserve Bank of Dallas.
    5. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, vol. 42(3-4), pages 327-347, May.
    6. Alfaro, Laura, 2005. "Inflation, openness, and exchange-rate regimes: The quest for short-term commitment," Journal of Development Economics, Elsevier, vol. 77(1), pages 229-249, June.
    7. Bowdler, Christopher & Nunziata, Luca, 2006. "Trade Openness and Inflation Episodes in the OECD," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(2), pages 553-563, March.
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