Capital account liberalization and inflation

Gruben, William C.; McLeod, Darryl

doi:10.1016/s0165-1765(02)00137-4

Cited by 57 publications

(36 citation statements)

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“…More recent studies such as Gruben and McLeod (2004), who use a panel data approach to control for country-specific effects, have basically confirmed the negative relation between inflation and openness to trade. Using a similar approach, Gruben and McLeod (2002) also find measures of capital account restrictions to be negatively related to inflation for a large sample of countries.…”

Section: Introductionmentioning

confidence: 94%

“…Gruben and McLeod (2002) argue that instrumenting for capital controls (using GDP and area) does not change the results (though they do not instrument for openness to trade).…”

Section: Introductionmentioning

confidence: 97%

“…Studies considering inflation only (such as Romer (1993), Lane (1997), McLeod (2002McLeod ( , 2004) cannot identify the transmission channel of the openness-inflation link. On the other hand, studies considering the effect on the sacrifice ratio (Daniels et al (2005), Razin and Loungani (2007)) cannot rule out that a positive link of openness with the sacrifice ratio might be associated with higher inflation.…”

Section: Introductionmentioning

confidence: 99%

“…To our knowledge, there are only two studies, both of them looking at the effect of policy based variables (capital account restrictions) on inflation (Gruben and McLeod (2002) for a large panel of countries) and the sacrifice ratio (Razin and Loungani (2007) for the Ball dataset); results are somewhat inconclusive, in particular, if both current and capital account restrictions are considered.…”

Section: Introductionmentioning

confidence: 99%

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Globalization, the output–inflation tradeoff and inflation

Badinger

2009

European Economic Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in FIW -Working PaperGlobalization, the Output-Inflation Tradeoff, and Inflation Harald BadingerThis paper provides a comprehensive assessment of the relation between inflation and globalization, measured in terms of trade and financial openness. Using a large crosssection of 91 countries covering the period 1985-2004, we establish two main empirical regularities. Both higher trade and financial openness i) reduce central bank's inflation bias,yielding lower average inflation, and ii) are associated with a larger output-inflation tradeoff. This evidence is at odds with the standard Barro-Gordon framework, which would require globalization to have a negative effect on the output-inflation tradeoff to yield lower equilibrium inflation, but it is consistent with a recent strand of new Keynesian models emphasizing the role of imperfect competition and wage rigidities. Moreover, our findings do not hold up for the OECD subsample, which suggests that a group of highly developed countries has been successful in creating an institutional framework for central banks that eliminates distortions due to the time inconsistency problem.

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Section: Introductionmentioning

confidence: 94%

“…Gruben and McLeod (2002) argue that instrumenting for capital controls (using GDP and area) does not change the results (though they do not instrument for openness to trade).…”

Section: Introductionmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Globalization, the output–inflation tradeoff and inflation

Badinger

2009

European Economic Review

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“…As pointed out by Tytell and Wei (2004) these include national competition policy, regulation of banks, equity and labour markets and finally, monetary and fiscal policy. Several papers like Tytell and Wei (2004), Gruben and McLeod (2002) and Razin and Yuen (1995) have argued that capital account openness appears to lower inflation by disciplining monetary authorities. Similarly, Kim (2003) goes on to argue that capital account liberalization is associated with a lower fiscal deficit.…”

Section: Regression Analysismentioning

confidence: 99%

Determinants of Trade Misinvoicing

2011

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Traditional explanations for trade misinvoicing --high custom duties and weak domestic economies -are less persuasive in a world of high growth emerging markets who have low trade barriers. We construct a 35-country data set over a 26 year span, covering both industrialised and developing countries, to study the phenomena of export and import misinvoicing. Capital account openness, differentials in interest rates, political stability, corruption, indebtedness and the exchange rate regime are identified as factors related to misinvoicing. Trade misinvoicing should be seen as one element of de facto capital account openness.

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Trade Openness, Market Competition, and Inflation: Some Sectoral Evidence From Oecd Countries

2012

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This study evaluates the role market competition plays in determining inflation based on sector-level data from OECD countries. In theory, trade openness can affect inflation through changes in market competitiveness and productivity. Nonetheless, previous empirical studies often fail to account for productivity effects, and their results may overstate the role of market competition. This study shows that inflation decreases with greater market competitiveness even after controlling for productivity effects. Indeed, when market competition and productivity effects are both accounted for, trade openness becomes insignificant in explaining inflation. The results support that changes in market competitiveness and productivity are the main channels through which trade openness affects inflation. Terms of use: Documents inJEL-Code: C230, E310, L160.

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Capital account liberalization and inflation

Cited by 57 publications

References 4 publications

Globalization, the output–inflation tradeoff and inflation

Globalization, the output–inflation tradeoff and inflation

Determinants of Trade Misinvoicing

Trade Openness, Market Competition, and Inflation: Some Sectoral Evidence From Oecd Countries

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