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The Disappearing Openness-Inflation Relationship: A Cross-Country Analysis of Inflation Rates

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  • Mr. M. F. Bleaney

Abstract

The robust negative correlation between openness and inflation found in cross-country data for the 1970s and 1980s has disappeared in the 1990s. There is now a strong negative correlation of inflation with per capita GDP, as higher-income countries have achieved significant disinflation not emulated by lower-income countries. Since 1973, the most consistent finding is that floating exchange rate regimes are associated with inflation rates at least 10 percent a year higher than pegged exchange rate regimes, after allowing for other factors. There is also a consistent positive correlation between land area and inflation.

Suggested Citation

  • Mr. M. F. Bleaney, 1999. "The Disappearing Openness-Inflation Relationship: A Cross-Country Analysis of Inflation Rates," IMF Working Papers 1999/161, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1999/161
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    Citations

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    Cited by:

    1. Adolfo Sachsida & Mário Jorge Cardoso de Mendonça, 2006. "Inflation and Trade Openness Revised: an Analysis Using Panel Data," Discussion Papers 1148, Instituto de Pesquisa Econômica Aplicada - IPEA.
    2. Szilard Erhart & Harmen Lehment & Jose Vasquez Paz, 2010. "Monetary policy committee size and inflation volatility," International Economics and Economic Policy, Springer, vol. 7(4), pages 411-421, December.
    3. Joseph Daniels & David VanHoose, 2009. "Trade Openness, Capital Mobility, and the Sacrifice Ratio," Open Economies Review, Springer, vol. 20(4), pages 473-487, September.
    4. Jim Granato & Melody Lo & M. C. Sunny Wong, 2007. "A note on Romer's openness-inflation relation: the responsiveness of AS and AD to economic openness and monetary policy," Applied Economics, Taylor & Francis Journals, vol. 39(2), pages 191-197.
    5. Fahim Marhubi, 2023. "Impact of Gender Discrimination Laws on Inflation: Evidence from Panel Data," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 29(3), pages 99-109, August.
    6. Andrea Vaona, 2015. "The price-price Phillips curve in small open economies and monetary unions: theory and empirics," International Economics and Economic Policy, Springer, vol. 12(2), pages 281-307, June.
    7. Daniels, Joseph P. & Nourzad, Farrokh & VanHoose, David D., 2006. "Openness, centralized wage bargaining, and inflation," European Journal of Political Economy, Elsevier, vol. 22(4), pages 969-988, December.
    8. Stephanos Papadamou & Moïse Sidiropoulos & Eleftherios Spyromitros, 2016. "Central bank transparency and exchange rate volatility effects on inflation-output volatility," Economics and Business Letters, Oviedo University Press, vol. 5(4), pages 125-133.
    9. Gernot Pehnelt, 2007. "Globalisation and Inflation in OECD Countries," Jena Economics Research Papers 2007-055, Friedrich-Schiller-University Jena.
    10. Daniels, Joseph P. & VanHoose, David D., 2009. "Openness, income-tax progressivity, and inflation," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 485-491, September.
    11. Mafi-Kreft, Elham & Kreft, Steven F., 2006. "Importing credible monetary policy: A way for transition economies to fight inflation?," Economics Letters, Elsevier, vol. 92(1), pages 1-6, July.
    12. Sikdar, Asaduzzaman & Kundu, Nobinkhor & Khan, Zakir Saadullah, 2013. "Trade openness and inflation: A test of Romer hypothesis for Bangladesh," MPRA Paper 65244, University Library of Munich, Germany, revised 16 Oct 2013.
    13. Megha Chhabra & Qamar Alam, 2020. "An empirical study of trade openness and inflation in India," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(1), pages 79-90, March.
    14. Philipp F. M. Baumann & Enzo Rossi & Alexander Volkmann, 2020. "What Drives Inflation and How: Evidence from Additive Mixed Models Selected by cAIC," Papers 2006.06274, arXiv.org, revised Aug 2022.

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