Openness and Inflation Rate: The Study of Selected Countries using Panel Quantile Regressions

Document Type : Original Article

Author

Assistant Professor of Economics, Faculty of Humanities and Social Sciences, University of Golestan, Gorgan, Iran

Abstract

Identifying the causes of inflation has always been one of the most important questions in macroeconomics. Developing world trade has led the international economics indicators to enter into inflation modeling. Accordingly, one of the variables that can affect inflation is the degree of openness. Theoretical foundations expect that openness of country to reduce the inflation rate. The amount of inflation has a significant effect on the type of impact that openness has on the inflation rate. Therefore, this study tests the above hypothesis in 4 groups of countries by using Panel Quantile Regressions method for the period 2019-1980: 1- Europe (7 countries) 2- East Asia and Pacific (10 countries) 3- Middle East and North Africa (9 countries) 4- Latin America and Caribbean (18 countries). The results of the study show that the inflation rate often decreases with openness, but this effect was closely explained to the size of inflation and the structure of the country's groups. Trade openness has had the least impact on inflation in East Asia and the Pacific and the largest impact on inflation in the Middle East and North Africa. In addition, the above results change with the change in the trade openness index, so the increasing exports will reduce the negative effect of imports on inflation.

Keywords

References

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Journal of Economics and Modelling
Volume 11, Issue 3 - Serial Number 43
December 2020
Pages 123-150

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