Investigating the Causal Relationship between Inflation and Trade Openness using Toda–Yamamoto Approach: Evidence from Zambia

Zombe Chibvalo, Daka Lincoln, Phiri Christopher, Oliver Kaonga, Seshamani Venkatesh and Chibwe Francis
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Phiri Christopher: Department of Economics, Copperbelt University, Kitwe, Zambia
Seshamani Venkatesh: Department of Economics, University of Zambia, Lusaka, Zambia
Chibwe Francis: Rural Electrification Authority, Lusaka, Zambia

Mediterranean Journal of Social Sciences, 2017, vol. 8, issue 6, 171-182

Abstract: The paper examines whether a significant relationship exists between inflation and trade openness in Zambia over the period 1985 to 2015. We use the Toda-Yamamoto approach to Granger causality to test for a causal relationship between inflation and trade openness. The results establish a bi-directional causality between inflation and trade openness. Further, there exists a positive relationship between inflation and trade openness in Zambia. Our findings stress the importance for central banks to understand the consequences of international trade for domestic inflation.

Keywords: inflation; trade openness; Toda-Yamamoto approach to Granger causality (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:mjsosc:v:8:y:2017:i:6:p:171-182:n:18

DOI: 10.1515/mjss-2017-0054

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