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The openness-inflation puzzle revisited

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  • William Gruben
  • Darryl Mcleod

Abstract

Dynamic panel estimates show the negative relation between trade openness and inflation found by Romer (Quarterly Journal of Economics, (VIII, 869-903, 1993) but questioned by Terra (Quarterly Journal of Economics, (XIII, 641-48, 1998) became more robust in the 1990s, both among high income OECD and developing countries. Trade openness was also associated with less variable inflation during the 1990s and had a stronger disinflation effect in economies with floating exchange rates.

Suggested Citation

  • William Gruben & Darryl Mcleod, 2004. "The openness-inflation puzzle revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 11(8), pages 465-468.
    • Handle: RePEc:taf:apeclt:v:11:y:2004:i:8:p:465-468
    DOI: 10.1080/1350485042000244477
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    References listed on IDEAS

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    1. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 869-903.
    2. Christopher Bowdler, 2003. "Openness and the Output-Inflation Tradeoff," Economics Series Working Papers 2003-W04, University of Oxford, Department of Economics.
    3. Lane, Philip R., 1997. "Inflation in open economies," Journal of International Economics, Elsevier, vol. 42(3-4), pages 327-347, May.
    4. Christopher Bowdler, 2003. "Openness and the Output-Inflation Tradeoff," Economics Papers 2003-W04, Economics Group, Nuffield College, University of Oxford.
    5. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    6. Guender, Alfred V. & McCaw, Sharon, 2000. "The inflationary bias in a model of the open economy: a note," Economics Letters, Elsevier, vol. 68(2), pages 173-178, August.
    7. David Romer, 1998. "A New Assessment of Openness and Inflation: Reply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 649-652.
    8. Cristina T. Terra, 1998. "Openness and Inflation: A New Assessment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 641-648.
    9. Temple, Jonathan, 2002. "Openness, Inflation, and the Phillips Curve: A Puzzle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 450-468, May.
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