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Trade Openness and Inflation Rate in China: Empirical Evidence from Time Series Data

Author

Listed:
  • Muhammad Tahir

    (Department of Management Sciences, COMSATS University Islamabad, Abbottabad Campus, Abbottabad 22020, Pakistan)

  • Norulazidah Omar Ali

    (UBD School of Business and Economics, Universiti Brunei Darussalam, Tungku Link Road, Bandar Seri Begawan 999092, Brunei)

  • Imran Naseem

    (Department of Pakistan Studies and International Relations, Abbottabad University of Science and Technology (AUST), Havelian 22500, Pakistan)

  • Umar Burki

    (USN School of Business, Department of Business, History and Social Sciences, University of South-Eastern Norway, 3184 Borre, Norway
    Department of Economics and Administration, Oslo New University College, 0456 Oslo, Norway)

Abstract

This study empirically examines the influence of trade openness on the rate of inflation by focusing on the Chinese economy. The study utilizes data covering the period 1987–2019 and employs the autoregressive distributed lag model (ARDL) for the extraction of results from the designed models. The results of the study indicate that trade openness has indeed impacted the rate of inflation not only negatively but also significantly. This means that trade openness could be used as a tool to fight against higher inflation. Similarly, government expenditure, economic growth, exchange rate and money supply positively affect inflation. Money supply and government expenditures positively affect the rate of inflation in the short run. The study has important policy implications for the Chinese economy.

Suggested Citation

  • Muhammad Tahir & Norulazidah Omar Ali & Imran Naseem & Umar Burki, 2023. "Trade Openness and Inflation Rate in China: Empirical Evidence from Time Series Data," Economies, MDPI, vol. 11(10), pages 1-10, September.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:10:p:240-:d:1249168
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    References listed on IDEAS

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    2. Yung-Hsing Guo, 2013. "How China Navigated the Dilemma of Trade Liberalization and Government Revenues," Development and Change, International Institute of Social Studies, vol. 44(4), pages 991-1012, July.
    3. Faqin Lin & Dongzhou Mei & Huanhuan Wang & Xi Yao, 2017. "Romer was right on openness and inflation: Evidence from Sub-Saharan Africa," Journal of Applied Economics, Universidad del CEMA, vol. 20, pages 121-140, May.
    4. Dollar, David, 1992. "Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985," Economic Development and Cultural Change, University of Chicago Press, vol. 40(3), pages 523-544, April.
    5. George Adu & George Marbuah, 2011. "Determinants Of Inflation In Ghana: An Empirical Investigation," South African Journal of Economics, Economic Society of South Africa, vol. 79(3), pages 251-269, September.
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