The Disappearing Openness-Inflation Relationship: A Cross-Country Analysis of Inflation Rates
December 1, 1999
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Summary
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.
Subject: Exchange rate arrangements, Floating exchange rates, Foreign exchange, Imports, Inflation, International trade, Population and demographics, Prices
Keywords: dependent variable, exchange rate, Exchange rate arrangements, Floating exchange rates, GDP, Global, Imports, inflation, inflation aversion parameter, inflation rate, openness, openness coefficient, openness-inflation correlation, rate of inflation, regime regression, regime score, WP
Pages:
16
Volume:
1999
DOI:
Issue:
161
Series:
Working Paper No. 1999/161
Stock No:
WPIEA1611999
ISBN:
9781451857795
ISSN:
1018-5941
