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The openness-inflation puzzle revisited

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  • William C. Gruben
  • Darryl McLeod

Abstract

Dynamic panel estimates show the negative relation between trade openness and inflation found by Romer (1993) but questioned by Terra (1998) became more robust in the 1990s, both among high income OECD and developing countries. Also during the 1990s, openness was associated with less variable inflation and had a stronger disinflation effect in economies with floating exchange rates.

Suggested Citation

  • William C. Gruben & Darryl McLeod, 2003. "The openness-inflation puzzle revisited," Center for Latin America Working Papers 0203, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddcl:0203
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    File URL: http://dallasfed.org/assets/documents/research/claepapers/2003/lawp0302.pdf
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    References listed on IDEAS

    as
    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. Guender, Alfred V. & McCaw, Sharon, 2000. "The inflationary bias in a model of the open economy: a note," Economics Letters, Elsevier, vol. 68(2), pages 173-178, August.
    3. David Romer, 1998. "A New Assessment of Openness and Inflation: Reply," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 649-652.
    4. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 869-903.
    5. Cristina T. Terra, 1998. "Openness and Inflation: A New Assessment," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 641-648.
    6. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, vol. 42(3-4), pages 327-347, May.
    7. Christopher Bowdler, 2003. "Openness and the Output-Inflation Tradeoff," Economics Papers 2003-W04, Economics Group, Nuffield College, University of Oxford.
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    Keywords

    Trade;

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