Trade openness and inflation: A test of Romer hypothesis for Bangladesh

Asaduzzaman Sikdar, Nobinkhor Kundu (nobinkundu@yahoo.com) and Zakir Saadullah Khan

MPRA Paper from University Library of Munich, Germany

Abstract: An important prediction found in international trade is that Trade openness can affect inflation. The trade openness or trade liberalization is associated with declining prices, that is, there is negative relation between inflation and trade openness. In line with this view, Romer (1993) postulates the hypothesis that inflation is lower in small and open economies. The objective of this paper is to explore the relationship between trade openness and inflation for the small economy Bangladesh using data over 1976 -2010 period. For this purpose, Cointegration Approach and a Vector Error Correction Model (VECM) have been used. Empirical results show that there is a significant negative long-run relationship between inflation and trade openness, which confirms the existence of Romer’s hypothesis in Bangladesh.

Keywords: Inflation; Trade Openness; Bangladesh (search for similar items in EconPapers)
JEL-codes: C32 E31 O53 (search for similar items in EconPapers)
Date: 2013-06-18, Revised 2013-10-16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in The Journal of Comilla University 1.2(2013): pp. 85-96

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/65244/1/MPRA_paper_65244.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:65244

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).