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Openness and Inflation: A Case Study of Pakistan

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  • Hanif, Muhammad N.
  • Batool, Irem

Abstract

Romer (1993) postulates a hypothesis that inflation is lower in small and open economies. In this paper we test this hypothesis for Pakistan economy using annual time series data for the period 1973-2005. We find that besides the conventional explanatory variables like real GDP growth, monetary growth, interest rate, and wheat support price, the openness variable such as growth in ‘overall trade to GDP ratio’ also has significant negative impact on the domestic price growth in Pakistan.

Suggested Citation

  • Hanif, Muhammad N. & Batool, Irem, 2006. "Openness and Inflation: A Case Study of Pakistan," MPRA Paper 10214, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:10214
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    References listed on IDEAS

    as
    1. 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.
    2. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 869-903.
    3. Cristina T. Terra, 1998. "Openness and Inflation: A New Assessment," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 641-648.
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    Citations

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    Cited by:

    1. Shahzad Ahmad & Farooq Pasha, 2015. "A Pragmatic Model for Monetary Policy Analysis I: The Case of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 1-42.
    2. Ahmad, Khalil & Mahmood, Haider, 2013. "Openness-Inflation Puzzle: Evidence from Pakistan," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 36(3), pages 69-78, September.
    3. 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.
    4. Mehmet BALCILAR & Ojonugwa USMAN & Muhammad Sani MUSA, 2020. "The Long-Run and Short-Run Exchange Rate Pass-Through during the Period of Economic Reforms in Nigeria: Is it Complete or Incomplete?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 151-172, March.
    5. Muhammad Nadim Hanif & Muhammad Jahanzeb Malik, 2015. "Evaluating the Performance of Inflation Forecasting Models of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 43-78.
    6. Hayat, Zafar & Balli, Faruk & Rehman, Muhammad, 2017. "The relevance and relative robustness of sources of inflation bias in Pakistan," Economic Modelling, Elsevier, vol. 63(C), pages 283-303.
    7. HAMI Mahyar, 2014. "Inflation And Openness: Empirical Evidences From Iran (1965-2010)," Studies in Busine and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 9(2), pages 27-32, August.
    8. Ismail, Yusra & Masih, Mansur, 2019. "Is the relationship between inflation and financial development symmetric or asymmetric? new evidence from Sudan based on NARDL," MPRA Paper 94694, University Library of Munich, Germany.
    9. Hanif, Muhammad Nadim, 2012. "A Note on Food Inflation in Pakistan," MPRA Paper 45009, University Library of Munich, Germany, revised 11 Mar 2013.
    10. Alimi, R. Santos & Olorunfemi, Sola, 2018. "Does Inflation Uncertainty Matter for Validity of Romer’s Hypothesis? Evidence from Nigeria," MPRA Paper 90948, University Library of Munich, Germany.
    11. Aliyev, Khatai & Gasimov, Ilkin, 2014. "Openness-Inflation Nexus in South Caucasus Economies," MPRA Paper 62761, University Library of Munich, Germany.
    12. Aram Sepehrivand & Jabar Azizi, 2016. "The Effect of Trade Openness on Inflation in D-8 Member Countries with an Emphasis on Romer Theory," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 4(4), pages 162-167, December.
    13. HAMI Mahyar, 2017. "The Effect Of Inflation On Financial Development Indicators In Iran (2000-2015)," Studies in Busine and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 12(2), pages 53-62, August.

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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