Trade openness and the Phillips curve: The neglected heterogeneity and robustness of empirical evidence

Sylvester Eijffinger and Zongxin Qian

International Review of Economics & Finance, 2016, vol. 44, issue C, 13-18

Abstract: A cross-country parameter homogeneity assumption is usually imposed in the literature to test the effect of trade openness on the slope of the Phillips curve. A conclusion from this literature is that trade openness has no significant effect in advanced industrial countries. In this paper, we argue that the validity of the parameter homogeneity assumption is not guaranteed from a theoretical perspective, and we find that this assumption is not valid for advanced industrial countries. Trade openness has significant effects on the slope of the Phillips curve in several industrial countries but the signs of the effects vary across countries.

Keywords: Openness; Phillips curve; Heterogeneity (search for similar items in EconPapers)
JEL-codes: E31 E52 F41 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:44:y:2016:i:c:p:13-18

DOI: 10.1016/j.iref.2016.03.006

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