Trade openness, market competition, and inflation: Some sectoral evidence from OECD countries

Arbeitspapier

This study evaluates the role market competition plays in determining inflation based on sector-level data from OECD countries. In theory, trade openness can affect inflation through changes in market competitiveness and productivity. Nonetheless, previous empirical studies often fail to account for productivity effects, and their results may overstate the role of market competition. This study shows that inflation decreases with greater market competitiveness even after controlling for productivity effects. Indeed, when market competition and productivity effects are both accounted for, trade openness becomes insignificant in explaining inflation. The results support that changes in market competitiveness and productivity are the main channels through which trade openness affects inflation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3690

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Price Level; Inflation; Deflation ; Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
• Subject: trade openness ; inflation ; market structure ; static panel ; dynamic panel ; Inflation ; Politik der offenen Tür ; Außenhandelsliberalisierung ; Branche ; Wettbewerb ; Marktstruktur ; Produktivität ; Schätzung ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Binici, Mahir ; Cheung, Yin-Wong ; Lai, Kon S.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/55327
• Last update: 10.03.2025, 11:42 AM CET