Do Trade Openness and Output Gap Affect Inflation? Empirical Evidence from BRICS Nations

IF 1.3 Q1 AREA STUDIES

Millennial Asia Pub Date : 2022-09-03 DOI:10.1177/09763996221116586

Megha Chhabra, A. K. Giri, Arya Kumar

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引用次数: 1

Abstract

The recent economic disturbances such as the outbreak of coronavirus, the Russia–Ukraine war, and disrupted supply chains, have resulted in high inflationary shocks that are difficult to combat. The most vulnerable to these global shocks are developing countries where trade is a crucial factor in economic growth. In this context, the study aims to investigate the impact of trade openness and output gap on inflation in BRICS countries from 1999Q1 to 2018Q4. Owing to growing economic integration and rising cross-sectional dependence, the study employs Dynamic Common Correlated Effect (DCCE) model to examine the long-run relationship between the variables. In addition, the study employs Dumitrescu and Hurlin (2012) to investigate the causal relationship between variables. The findings suggest that a more open trade policy helps to reduce rising domestic inflation. The price lowering impact of export openness outperforms the inflationary impact of imports, resulting in flattened Phillips curve. Moreover, the results indicate that the underpowered effect of the domestic output gap is not sufficient to counteract the unfavourable impact of the foreign output gap on inflation in BRICS. As a result, the study advocates providing subsidies and tax breaks to help export-oriented businesses thrive while keeping the global factors in check.

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贸易开放和产出缺口影响通胀吗?来自金砖国家的经验证据

最近的经济动荡，如冠状病毒的爆发、俄乌战争和供应链中断，导致了难以应对的高通胀冲击。最容易受到这些全球冲击的是发展中国家，在这些国家，贸易是经济增长的关键因素。在此背景下，本研究旨在探讨1999年第一季度至2018年第四季度金砖国家贸易开放和产出缺口对通胀的影响。由于经济一体化程度的提高和横向依存度的提高，本研究采用动态共同相关效应(DCCE)模型来检验变量之间的长期关系。此外，本研究采用Dumitrescu和Hurlin(2012)对变量之间的因果关系进行研究。研究结果表明，更加开放的贸易政策有助于降低不断上升的国内通胀。出口开放的价格降低作用优于进口的通货膨胀作用，导致菲利普斯曲线趋平。此外，研究结果表明，金砖国家国内产出缺口的动力不足不足以抵消国外产出缺口对通胀的不利影响。因此，该研究主张提供补贴和税收减免，以帮助出口导向型企业蓬勃发展，同时控制全球因素。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Millennial Asia AREA STUDIES-

CiteScore

4.50

自引率

12.50%

发文量

期刊介绍： Millennial Asia: An International Journal of Asian Studies is a multidisciplinary, refereed biannual journal of the Association of Asia Scholars (AAS)–an association of the alumni of the Asian Scholarship Foundation (ASF). It aims to encourage multifaceted, multidisciplinary and interdisciplinary research on Asia, in order to understand its fast changing context as a growth pole of global economy. By providing a forum for Asian scholars situated globally, it promotes dialogue between the global academic community, civil society and policy makers on Asian issues. The journal examines Asia on a regional and comparative basis, emphasizing patterns and tendencies that go beyond national borders and are globally relevant. Modern and contemporary Asia has witnessed dynamic transformations in cultures, societies, economies and political institutions, among others. It confronts issues of collective identity formation, ecological crisis, rapid economic change and resurgence of religion and communal identifies while embracing globalization. An analysis of past experiences can help produce a deeper understanding of contemporary change. In particular, the journal is interested in locating contemporary changes within a historical perspective, through the use of interdisciplinary and multidisciplinary approaches. This way, it hopes to promote comparative studies involving Asia’s various regions. The journal brings out both thematic and general issues and the thrust areas are: Asian integration, Asian economies, sociology, culture, politics, governance, security, development issues, arts and literature and any other such issue as the editorial board may deem fit. The core fields include development encompassing agriculture, industry, regional trade, social sectors like health and education and development policy across the region and in specific countries in a comparative perspective.