The Asymmetric Impacts of Economic, Social, and Political Globalization on Inflation

Hande Aksoz Yılmaz ()
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Hande Aksoz Yılmaz: Kirsehir Ahi Evran University, Economics Department, Kirsehir, Turkiye

Journal of Economic Policy Researches, 2024, vol. 11, issue 1, 63–74

Abstract: This study aims to investigate the asymmetric effects of globalization on inflation. While theoretical and applied studies emphasize the negative effect of globalization on inflation, they explain this through market mechanisms and efficiency. In an open economy, the need for seigniorage incomes decreases, as the incomes obtained as a result of trade will increase. An economy that increases foreign trade revenues needs less seigniorage revenues. Foreign trade income will result in a decline in inflation if an increase in the money supply is the primary cause of inflation. Romer (1993) emphasizes that the other channel that reveals the negative effect of globalization on inflation is the market mechanism. In this instance, the presence of foreign currencies that can take the place of the national currency in an open economy helps to lower inflation. Also, inflation is reduced by economic openness because it allows for specialization and economies of scale. This study uses the annual data of Turkey’s consumer price index, GDP per capita, general government final consumption expenditures (% of GDP), globalization index-KOF (economic, political, and social globalization indexes), and exchange rate variables for 1970-2021. The non-linear autoregressive distributed lags (NARDL) estimation method is used in the analysis of the asymmetric effect of different components of globalization on inflation. The findings reveal that economic and social globalization has an asymmetric effect on inflation; however, also revealed is the non-significance of the asymmetrical effect of political globalization on inflation.

Keywords: Economic Globalization; Social Globalization; Political Globalization; Inflation; Non-Linear ARDL JEL Classification : B23; F6; E31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ist:iujepr:v:11:y:2024:i:1:p:63-74

DOI: 10.26650/JEPR1349411

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