Rouzbeh Parsi

Topic

Trade Openness and Inflation Dynamics: A panel data Analysis

Economics

Date & location

• Friday, January 12, 2024

• 2:00 P.M.

• Virtual Defence

Reviewers

Supervisory Committee

• Dr. Vasco Gabriel, Department of Economics, University of Victoria (Supervisor)

• Dr. Graham Voss, Department of Economics, UVic (Member) 

External Examiner

• Dr. Alex Ferreira, Department of Economics, University of Saul Paulo 

Chair of Oral Examination

• Dr. Natalie Ban, School of Environmental Studies, UVic

   

Abstract

This Thesis delves into the intricate relationship between trade openness and inflation, challenging conventional narratives that suggest a straightforward negative correlation between the two. By constructing a comprehensive dataset, which encompasses a spectrum of economic, political, and financial indicators, as well as two proxies for trade openness, we offer a nuanced perspective on the topic. Central to our findings is the critical role of allowing for cross-sectional dependence in panel data, which has been frequently overlooked in past studies. Our analysis reveals a multifaceted relationship, where the influence of trade openness on inflation is dynamic and ambiguous in direction. While traditional openness metrics offer insights, multidimensional proxies, such as the KOF trade openness index, provide richer perspectives. Our results underscore the need for thorough analysis and robust methodologies when exploring this economic relationship, suggesting that the dynamics of trade and inflation are more complex than previously assumed.

Keywords: Inflation; Cross-section dependence; Trade Openness, Dynamic Common Correlated Effects.