Trade openness and inflation dynamics in Brazil

Fernando Marques Mansilla (), Elano Ferreira Arruda () and Roberto Ferreira
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Fernando Marques Mansilla: Federal University of Ceará
Elano Ferreira Arruda: Federal University of Ceará

Economics Bulletin, 2020, vol. 40, issue 3, 1948-1957

Abstract: This work examines the possible asymmetries of Brazil's inflation dynamics in distinct trade openness regimes. For that purpose, we estimate a nonlinear Hybrid New Keynesian Phillips Curve (HNKPC) with the degree of trade openness as the threshold variable. We use monthly data between January 2002 and December 2017 and econometric models with threshold effects in the presence of endogenous regressors. The results indicate the absence of a tradeoff between inflation and unemployment and of inflation inertia in the regime with the most openness. However, in the regime with the least openness, these variables are statistically significant.

Keywords: Trade Openness; Phillips Curve; Inflation (search for similar items in EconPapers)
JEL-codes: F4 O5 (search for similar items in EconPapers)
Date: 2020-07-14
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