Trade openness and the Phillips curve

The neglected heterogeneity and robustness of empirical evidence

Sylvester C. W. Eijffinger, Zongxin Qian*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

A cross-country parameter homogeneity assumption is usually imposed in the literature to test the effect of trade openness on the slope of the Phillips curve. A conclusion from this literature is that trade openness has no significant effect in advanced industrial countries. In this paper, we argue that the validity of the parameter homogeneity assumption is not guaranteed from a theoretical perspective, and we find that this assumption is not valid for advanced industrial countries. Trade openness has significant effects on the slope of the Phillips curve in several industrial countries but the signs of the effects vary across countries.

Original languageEnglish
Pages (from-to)13-18
JournalInternational Review of Economics & Finance
Volume44
DOIs
Publication statusPublished - Jul 2016

Keywords

  • Openness
  • Phillips curve
  • Heterogeneity

Cite this

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abstract = "A cross-country parameter homogeneity assumption is usually imposed in the literature to test the effect of trade openness on the slope of the Phillips curve. A conclusion from this literature is that trade openness has no significant effect in advanced industrial countries. In this paper, we argue that the validity of the parameter homogeneity assumption is not guaranteed from a theoretical perspective, and we find that this assumption is not valid for advanced industrial countries. Trade openness has significant effects on the slope of the Phillips curve in several industrial countries but the signs of the effects vary across countries.",
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Trade openness and the Phillips curve : The neglected heterogeneity and robustness of empirical evidence. / Eijffinger, Sylvester C. W.; Qian, Zongxin.

In: International Review of Economics & Finance, Vol. 44, 07.2016, p. 13-18.

Research output: Contribution to journalArticleScientificpeer-review

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N2 - A cross-country parameter homogeneity assumption is usually imposed in the literature to test the effect of trade openness on the slope of the Phillips curve. A conclusion from this literature is that trade openness has no significant effect in advanced industrial countries. In this paper, we argue that the validity of the parameter homogeneity assumption is not guaranteed from a theoretical perspective, and we find that this assumption is not valid for advanced industrial countries. Trade openness has significant effects on the slope of the Phillips curve in several industrial countries but the signs of the effects vary across countries.

AB - A cross-country parameter homogeneity assumption is usually imposed in the literature to test the effect of trade openness on the slope of the Phillips curve. A conclusion from this literature is that trade openness has no significant effect in advanced industrial countries. In this paper, we argue that the validity of the parameter homogeneity assumption is not guaranteed from a theoretical perspective, and we find that this assumption is not valid for advanced industrial countries. Trade openness has significant effects on the slope of the Phillips curve in several industrial countries but the signs of the effects vary across countries.

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KW - Heterogeneity

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JO - International Review of Economics & Finance

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