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Trade openness and the Phillips curve: The neglected heterogeneity and robustness of empirical evidence

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  • Eijffinger, Sylvester C.W.
  • Qian, Zongxin

Abstract

A cross-country parameter homogeneity assumption is usually imposed in the literature to test the effect of trade openness on the slope of the Phillips curve. A conclusion from this literature is that trade openness has no significant effect in advanced industrial countries. In this paper, we argue that the validity of the parameter homogeneity assumption is not guaranteed from a theoretical perspective, and we find that this assumption is not valid for advanced industrial countries. Trade openness has significant effects on the slope of the Phillips curve in several industrial countries but the signs of the effects vary across countries.

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  • Eijffinger, Sylvester C.W. & Qian, Zongxin, 2016. "Trade openness and the Phillips curve: The neglected heterogeneity and robustness of empirical evidence," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 13-18.
    • Handle: RePEc:eee:reveco:v:44:y:2016:i:c:p:13-18
    DOI: 10.1016/j.iref.2016.03.006
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    Cited by:

    1. Fernando Marques Mansilla & Elano Ferreira Arruda & Roberto Tatiwa Ferreira, 2020. "Trade openness and inflation dynamics in Brazil," Economics Bulletin, AccessEcon, vol. 40(3), pages 1948-1957.

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    More about this item

    Keywords

    Openness; Phillips curve; Heterogeneity;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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