TY - JOUR
T1 - Globalization and inflation
T2 - New panel evidence
AU - Kim, Dong Hyeon
AU - Lin, Shu Chin
AU - Wu, Yi Chen
N1 - Publisher Copyright:
© 2015 Cambridge University Press.
Copyright:
Copyright 2016 Elsevier B.V., All rights reserved.
PY - 2014/9/16
Y1 - 2014/9/16
N2 - 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.
AB - 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.
KW - Cross-Section Dependence
KW - Financial Openness
KW - Heterogeneous Panels
KW - Inflation
KW - Trade Openness
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U2 - 10.1017/S1365100514000510
DO - 10.1017/S1365100514000510
M3 - Article
AN - SCOPUS:84953365824
SN - 1365-1005
VL - 20
SP - 1
EP - 26
JO - Macroeconomic Dynamics
JF - Macroeconomic Dynamics
IS - 1
ER -