Globalization and inflation: New panel evidence

Dong-Hyeon Kim, Shu Chin Lin, Yi Chen Wu

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Recent empirical work on globalization and inflation analyzes multicountry data sets in panel and/or cross-section frameworks and reaches inconclusive results. This paper highlights their shortcomings and reexamines the issue utilizing heterogeneous panel cointegration techniques that allow for cross-section heterogeneity and dependence. It finds that in a sample of developing countries globalization of both trade and finance, on the average, exerts a significant and positive effect on inflation, whereas in a sample of developed countries there is, on the average, no significant impact of openness. Neither type of openness disciplines inflationary policy. Despite this, there are large variations in the effect across countries, due possibly to differences in the quality of political institutions, central bank independence, the exchange-rate regimes, financial development, and/or legal traditions.

Original languageEnglish
Pages (from-to)1-26
Number of pages26
JournalMacroeconomic Dynamics
Volume20
Issue number1
DOIs
Publication statusPublished - 2014 Sep 16

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Keywords

  • Cross-Section Dependence
  • Financial Openness
  • Heterogeneous Panels
  • Inflation
  • Trade Openness

ASJC Scopus subject areas

  • Economics and Econometrics

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