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Openness and Inflation: A Case Study of Pakistan

Muhammad Hanif () and Irem Batool

MPRA Paper from University Library of Munich, Germany

Abstract: Romer (1993) postulates a hypothesis that inflation is lower in small and open economies. In this paper we test this hypothesis for Pakistan economy using annual time series data for the period 1973-2005. We find that besides the conventional explanatory variables like real GDP growth, monetary growth, interest rate, and wheat support price, the openness variable such as growth in ‘overall trade to GDP ratio’ also has significant negative impact on the domestic price growth in Pakistan.

JEL-codes: F15 (search for similar items in EconPapers)
Date: 2006
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