Have the free trade agreements reduced inflation rates?

Kwark, Noh-Sun; Lim, Hosung

doi:10.1016/j.econlet.2020.109054

Cited by 8 publications

(4 citation statements)

References 13 publications

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“…Comparative analysis with existing literature shows both alignments and divergences. Studies by Kwark and Lim [112], Juselius and Takáts [113], and Cruz [114] underscore the effectiveness of inflation-stabilizing policies under similar economic conditions. However, Bongers and Díaz-Roldán [115], Onafowora and Owoye [116], and Chowdhury and Sundaram [117] argue that growth-promoting policies may not significantly dampen inflation in the face of external shocks.…”

Section: Impulse Response Function Analysismentioning

confidence: 97%

Navigating Uncharted Waters: The Transformation of the Bank of Korea’s Monetary Policy in Response to Global Economic Uncertainty

He,

Teng

2024

Mathematics

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The evolving global economic landscape necessitates adaptive monetary policies, especially for economies like South Korea that are deeply integrated with global markets. This research explores the strategic recalibrations of the Bank of Korea’s monetary policy amid fluctuations in global economic uncertainty. Utilizing a sophisticated microeconomic theoretical framework, this study employs Bayesian estimation techniques and impulse response analysis to dissect the dynamic effects of these global shocks on South Korea’s macroeconomic stability and policy direction. Our findings reveal that the Bank of Korea has adeptly navigated through turbulent economic conditions induced by external shocks through well-coordinated policy adaptations. These adaptations, which include both traditional and innovative monetary tools, have been crucial in stabilizing the financial environment and promoting economic growth. By detailing the tailored application of the Taylor rule within the Korean context and strategic foreign exchange interventions by the central bank, this study contributes significantly to the broader discourse on the efficacy of monetary policy in open economies and offers insights on integrating advanced analytical methods into economic policy analysis.

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Section: Impulse Response Function Analysismentioning

confidence: 97%

Navigating Uncharted Waters: The Transformation of the Bank of Korea’s Monetary Policy in Response to Global Economic Uncertainty

He,

Teng

2024

Mathematics

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“…Employing instrumental variable techniques that correct for endogeneity bias of trade openness, the empirical evidence suggests that within-country variations in trade openness restrict inflation: a 1 percentage point increase in the ratio of trade over gross domestic product is associated with a decrease in inflation of approximately 0.08 percentage points per year. Also, Kwark, N., Lim, H., (2020), shows that free trade agreements have a significant negative effect on the Consumer Price Index inflation Bowdler & Malik (2017) using a dynamic panel model that controls for the endogeneity of openness and the effects of both average inflation and the exchange rate regime, offer one explanation for the recent decline in inflation volatility observed in many countries. The relationship is shown to be strongest amongst developing and emerging market economies.…”

Section: Literature Reviewmentioning

confidence: 99%

Free Trade and Inflation Nexus in Eight Emerging Economies of East Asia

Nazari

pourshahabi²,

Dashtban³

et al. 2022

International Journal of New Political Economy

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In this study, we are surveyed the effect of trade liberalization on the inflation of eight precursor's economy of East Asia during 1990-2018. The main purpose of this research is to test the Romer (1993) Hypothesis for aforementioned countries. He says that there is a negative relationship between inflation and trade openness. For testing this subject, we are used the Britong (2000) unit root test for panel data and, the kao (1999) cointegration test for panel data. Notice to existence of nonstationary variables in the estimated model, we need to use the Kao (1999) co-integration test, and as a result of this test, there is a long run relationship between the variables of the model. The results show that the Romer (1993) hypothesis is confirmed for these countries and free trade reducing the inflation in these countries. Also, the effect of income per capita is negative but the liquidity volume coefficient shows the positive effect of this variable on inflation in these set of countries. In consequence, trade liberalization policy can suggest as a policy to declining inflation in these set of countries.

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“…This means that increase in trade openness tends to restrict inflation. On the other hand, [26] examined the impact of trade openness from a different perspective. They used studied impact of Free Trade Agreements (FTA) on inflation.…”

Section: Literature Reviewmentioning

confidence: 99%

Trade Openness and Crude Oil Price Effects on Food Inflation: Examining the Romer Hypothesis in Kenya

Lidiema¹

2020

JWER

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Food Prices accounts for about 36% of the overall consumer price index in Kenya and it's the single largest of the 12 components that make up the index. Therefore, shocks in food prices could considerably be transmitted to the overall consumer price index. While Kenya agricultural production is heavily rain-fed, external pressures from and shocks from crude oil price, international trade are transmitted inwards and pile more pressure on food prices as well. While inflation tend to follow all the available information in the market and business per the rational expectations' theory, price factors are a key determinant of business cycles, because price stickiness tend to drive demand. Therefore, demand for food products could be driven by several market features including internal food prices, oil prices, productions and importation costs. The objective of this research was to analyze the effect of Trade openness on food inflation in Kenya with a view of establishing if Romer's hypothesis holds in Kenya. The second objective is to establish the effect of crude oil prices on food inflation in Kenya. The study employed Autoregressive Distributed Lag (ARDL) cointegrating technique to estimate both short-run and long run estimates. The study findings indicate that trade openness significantly has a reducing influence on food inflation hence confirming the existence of Romer's hypothesis in Kenya. Secondly, crude oil prices have a positive and significant effect on food inflation. Interestingly, the study found that money supply does not have significant influence on food inflation. The study recommends embracing and adopting international free trade agreements to further leverage on imports prices, increase buffer storage to cushion against food demand and hence stabilize food prices. Secondly the government should enhance further price controls on oil prices to reduce spillovers to food production and supply costs. In addition, Kenya should develop technologies to improve agricultural farm production to leverage dependence of rain-fed agricultural sector.

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Have the free trade agreements reduced inflation rates?

Cited by 8 publications

References 13 publications

Navigating Uncharted Waters: The Transformation of the Bank of Korea’s Monetary Policy in Response to Global Economic Uncertainty

Navigating Uncharted Waters: The Transformation of the Bank of Korea’s Monetary Policy in Response to Global Economic Uncertainty

Free Trade and Inflation Nexus in Eight Emerging Economies of East Asia

Trade Openness and Crude Oil Price Effects on Food Inflation: Examining the Romer Hypothesis in Kenya

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