Inflation, Globalization and Interest Rate Nexus to Curb Price volatility: An Empirical Cross-Country Analysis

Arshi Shahid, Hafiz Khalil Ahmad and Saima Liaqat
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Arshi Shahid: PhD Scholar, Department of Economics, University of the Punjab, Lahore, Punjab, Pakistan.
Hafiz Khalil Ahmad: Professor, Department of Economics, Govt. College Women University, Sialkot, Punjab, Pakistan.
Saima Liaqat: Lecturer, Department of Economics, Lahore College for women university, Jhang Campus, Punjab, Pakistan.

Global Economics Review, 2020, vol. 5, issue 1, 153-165

Abstract: The aim of the present study is to investigate the long run impact of monetary policy and globalization on inflation in the selected South and South East Asian countries. The study measures the impact of monetary policy variables on inflation, ignoring random shocks as these are considered fewer fractions for the inconsistency of the policy instruments. Two exclusive dimensions, defacto and dejure measure of globalization, are taken into account. The study also employed Hodrick Prescott filter to calculate the domestic output gap in order to assess that still changes in domestic output gap is relevant to inflation variation. It employed structural modeling dynamic heterogeneous Panel data estimation technique, which accounts for endogeneity and serial correlation issues. The results of the study confirm that both global and domestic factors have significant and descriptive power for domestic inflation and interest rate is found to be a best nominal anchor to effect inflation.

Keywords: Globalization; Inflation; Monetary Policy; Output Gap (search for similar items in EconPapers)
Date: 2020
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