The effect of trade and financial liberalization on flationary volatility

Abstract

This thesis provides evidence for the relationships between trade liberalization and inflation volatility, and between financial liberalization and inflation volatility. Using a set of dynamic panel data for 142 emerging market and developing countries over the period of 1991-2014, this research finds statistically significant associations between each openness variables and inflation volatility. The robustness analyses also consider other control variables, different time windows and different measurements for inflation volatility as well as financial liberalization. The same result is consistently observed for both trade and financial openness, suggesting that trade and financial liberalization are associated with lower inflation volatility.