Trade Openness and Inflation Rate in China: Empirical Evidence from Time Series Data

Muhammad Tahir, Norulazidah Omar Ali, Imran Naseem and Umar Burki ()
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Muhammad Tahir: Department of Management Sciences, COMSATS University Islamabad, Abbottabad Campus, Abbottabad 22020, Pakistan
Norulazidah Omar Ali: UBD School of Business and Economics, Universiti Brunei Darussalam, Tungku Link Road, Bandar Seri Begawan 999092, Brunei
Imran Naseem: Department of Pakistan Studies and International Relations, Abbottabad University of Science and Technology (AUST), Havelian 22500, Pakistan
Umar Burki: USN School of Business, Department of Business, History and Social Sciences, University of South-Eastern Norway, 3184 Borre, Norway

Economies, 2023, vol. 11, issue 10, 1-10

Abstract: This study empirically examines the influence of trade openness on the rate of inflation by focusing on the Chinese economy. The study utilizes data covering the period 1987–2019 and employs the autoregressive distributed lag model (ARDL) for the extraction of results from the designed models. The results of the study indicate that trade openness has indeed impacted the rate of inflation not only negatively but also significantly. This means that trade openness could be used as a tool to fight against higher inflation. Similarly, government expenditure, economic growth, exchange rate and money supply positively affect inflation. Money supply and government expenditures positively affect the rate of inflation in the short run. The study has important policy implications for the Chinese economy.

Keywords: trade openness; inflation; ARDL; China (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
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