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Financial Openness and Inflation: An Empirical Analysis

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Abstract

Our empirical analysis reveals a strong systematic inverse link between financial openness and CPI inflation in over 100 countries, adding weight to the argument that inflation in financially open economies is lower. Trade openness in contrast bears no systematic relationship to inflation.

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  • Alfred V. Guender & Hamish McHugh-Smith, 2020. "Financial Openness and Inflation: An Empirical Analysis," Working Papers in Economics 20/18, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:20/18
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/2018.pdf
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    9. Richard T. Froyen & Alfred V Guender, 2016. "The Real Exchange Rate in Open-Economy Taylor Rules: A Re-Assessment," Working Papers in Economics 16/10, University of Canterbury, Department of Economics and Finance.
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    More about this item

    Keywords

    Financial Openness; Trade Openness; Inflation; Capital Controls;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance

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