Openness and Inflation Relationship: A Cross-Country Evidence During 1989-2014

KARMILA, Chun-Hung Kuo, Phd

2017 | Tesis | S2 Ekonomika Pembangunan

Thesis ini bertujuan menganalisis hubungan antara openness dan inflasi tahun 1989-2014 dengan metode cross-section. Hasil analisis dengan sample 167 negara menunjukkan bahwa terdapat hubungan yang bersifat negatif dan significan antara openness dan inflasi. Namun, korelasi negatif ini tidak berlaku untuk sub sampel negara maju dan korelasi negatif ini juga tidak begitu kuat pada sub periode 1999-2014. Untuk mengatasi masalah endogeneity, thesis ini jiga menerapkan metoda two least square (2SLS). Dengan menggunakan log jumlah penduduk dan luas area negara sebagai instrument, hasil regresi menunjukkan konsistensi antara OLS dan 2SLS.

This paper provides an empirical evidence of the relationship between openness and inflation, using cross-section analysis covering period 1989-2014. The results of the overall cross-section for 167 countries supports Romer's (1993) finding, showing the significant negative relationship between openness and inflation. However, this negative relationship not hold up for developed countries and less robust in the sub period of 1999-2014. The two-stage least procedure (2SLS) also employed to address the possible endogeneity of openness. Using log of population and log of land area as the instrumental variables, the 2SLS estimates confirms the consistent predictions and provide stronger estimates. This paper also found that the increase in money growth has a positive impact on the inflation rate and the increase in the income per capita has a negative impact the inflation rate

Kata Kunci : inflation, openness, income per capita, money growth