Do Trade Openness and Output Gap Affect Inflation? Empirical Evidence from BRICS Nations
Bibliographic Data
| ID | 13083092 |
|---|---|
| Authors | Megha Chhabra (0000-0002-5732-559X, Department of Economics and Finance, Birla Institute of Technology and Science (BITS), Pilani, Rajasthan, India, corresponding author), Arun Kumar Giri (0000-0002-7122-4517, Department of Economics and Finance, Birla Institute of Technology and Science (BITS), Pilani, Rajasthan, India), Arya Kumar (0000-0001-6301-7019, Department of Economics and Finance, Birla Institute of Technology and Science (BITS), Pilani, Rajasthan, India) |
| Year | 2022 |
| Volume | 15 |
| Issue | 3 |
| Pages | 359-383 |
| Publication date | 2022-09-03 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Millennial Asia (JOURNAL) |
| Journal identifiers | ISSN: 2321-7081 • E-ISSN: 0976-3996 |
| Publisher | SAGE Publishing (PUBLISHER • US) |
| DOI | 10.1177/09763996221116586 |
| OpenAlex | W4294717348 |
| Language | EN |
| References cited | 53 |
The recent economic disturbances such as the outbreak of coronavirus, the Russia–Ukraine war, and disrupted supply chains, have resulted in high inflationary shocks that are difficult to combat. The most vulnerable to these global shocks are developing countries where trade is a crucial factor in economic growth. In this context, the study aims to investigate the impact of trade openness and output gap on inflation in BRICS countries from 1999Q1 to 2018Q4. Owing to growing economic integration and rising cross-sectional dependence, the study employs Dynamic Common Correlated Effect (DCCE) model to examine the long-run relationship between the variables. In addition, the study employs Dumitrescu and Hurlin (2012) to investigate the causal relationship between variables. The findings suggest that a more open trade policy helps to reduce rising domestic inflation. The price lowering impact of export openness outperforms the inflationary impact of imports, resulting in flattened Phillips curve. Moreover, the results indicate that the underpowered effect of the domestic output gap is not sufficient to counteract the unfavourable impact of the foreign output gap on inflation in BRICS. As a result, the study advocates providing subsidies and tax breaks to help export-oriented businesses thrive while keeping the global factors in check
Context (archaeology · Economics · Emerging markets · Exchange rate · Inflation (cosmology · International economics · International trade · Macroeconomics · Market economy · Monetary economics · Monetary policy · Openness to experience · Output gap · Subsidy · Energy, Environment, Economic Growth · Fiscal Policy and Economic Growth · Global trade and economics
Estimating long-run relationships from dynamic heterogeneous panels
Openness and Inflation
Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors
The Optimal Degree of Commitment to an Intermediate Monetary Target
Testing for Granger non-causality in heterogeneous panels
General Diagnostic Tests for Cross Section Dependence in Panels
The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics
Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure
Testing slope homogeneity in large panels
A simple panel unit root test in the presence of cross‐section dependence
The Adjustment Mechanism to Differential Rates of Monetary Expansion among the Countries of the European Economic Community
Fiscal Dominance and the Inflation Dynamics in Pakistan
Bilateral Trade Among Brazil, Russia, India, China and South Africa Economies
Inflation, openness, and exchange-rate regimes
| Highly cited | No |
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