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Openness and Inflation: A Case Study of Pakistan

  • Hanif, Muhammad N.
  • Batool, Irem

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10214.

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Date of creation: 2006
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Handle: RePEc:pra:mprapa:10214
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  1. David Romer, 1991. "Openness and Inflation: Theory and Evidence," NBER Working Papers 3936, National Bureau of Economic Research, Inc.
  2. 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.
  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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