Trade openness, market competition, and inflation : Some sectoral evidence from oecd countries

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

3 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)321-336
Journal / PublicationInternational Journal of Finance and Economics
Volume17
Issue number4
StatePublished - Oct 2012

Abstract

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. © 2012 John Wiley & Sons, Ltd.

Research Area(s)

  • Dynamic panel, Inflation, Market structure, Static panel, Trade openness