The Relationship between Trade Openness and Inflation in Turkey

  • Rana Atabay
Keywords: Trade Openness, Inflation, Turkey

Abstract

Both in Turkey and in the world in 1980 was a year of major structural transformations. Globalization has been accelerated in this time and countries have implemented some liberal policies for opening borders to foreign capital. Economies began to be led by export-oriented industrialization and liberalization policies after 1980 and these policies continue since then. Turkey is one of these countries that began liberalization after 1980. While decreasing trade barriers exerts a downward pressure on prices trade liberalization represents a structural break. This study aims to examine the relationship between trade openness and inflation over the period 1980-2011 for Turkey by using OLS method. The proportion of foreign trade volume (exports plus imports) to GDP and real exchange rates are used as measures of trade openness besides inflation rate. As a result of the study, it has been determined that there was a negative correlation between trade openness and inflation rate for the dedicated years in Turkey. The effects of crisis and election years in Turkey have been also tested and found statistically insignificant.

References

Alfaro, L. (2005). Inflation, Openness, And Exchange-Rate Regimes: The Quest For Short-Term Commitment, Journal of Development Economics, 77: 229-49. doi: 10.1016/j.jdeveco.2004.02.006

Ashra, S. (2002). Inflation and Openness: A Study of Selected Developing Economies, Working Paper No. 2002 (84), Indian Council For Research On International Economic Relations, New Delhi, India.

Ateş, İ, Bostan A. (2007). Türkiye’de Dış Ticaretin Serbestleşmesi Ve Yoksullaştıran Büyüme (1989-2004), Muğla Üniversitesi SBE Dergisi (İlke), Bahar, Sayı:18.

Batra, R. (2001). Are Tariffs Inflationary?, Review of International Economics, 9: 373-82. doi: 10.1111/1467-9396.00286

Boschen, J. and Weise C. (2003). What Starts Inflation: Evidence From the OECD Countries, Journal of Money, Credit and Banking 35: 324-349.

Bowdler C. and Nunziata L. (2006). Trade Openness and Inflation Episodes in the OECD, Journal of Money, Credit and Banking, Vol. 38, No. 2 (March), 553-563.

Bowdler, C. and Malik A. (2005). Openness and Inflation Volatility: Cross-Country Evidence. CSAE Working Paper Series, No: 2005-08, Center for the Study of African Economies, University of Oxford.

Evans, R.W. (2007). Is Openness Inflationary? Imperfect Competition and Monetary Market Power, Working Paper No. 2007 (1), Federal Reserve Bank of Dallas.

Feleke, M. (2014). Effect of Trade Openness n Inflation in Ethiopia (An Auto Regressive Distributive Lag Approach), Economic Policy Analysis MSc Thesis, Addis Ababa University, October.

Gökalp, M. F. (2000). Liberalizasyon Sürecinde Türkye’de Dış Ticaret Hadleri Trendi ve Dış Ticaret Hadlerindeki Değişmelerin Gelir Etkisi, DEÜ İIBF Dergisi, Cilt:15, Sayı:1, 49-65.

Gruben, W.C., McLeod, D. (2004). The Openness–Inflation: Puzzle Revisited. Applied Economics Letters, 11: 465-68. DOI: 10.1080/1350485042000244477

Hepaktan, C. E. (2008), Türkiye’nin Dönüşüm Sürecinde Dış Ticaret Politikaları, 2. Ulusal İktisat Kongresi, 20-22 Şubat, İzmir.

IMF (2006). How Has Globalization Affected Inflation?. World Economic Outlook, Chapter III, 97-134.

Iyoha, M. A. (1973). Inflation and “Openness” in Less Developed Economies: A Cross-Country Analysis, Economic Development and Cultural Change, 22(1): 31-38. doi: 10.1086/451001

Kim, M., Beladi, H. (2005). Is Free Trade Deflationary, Economics Letters, 89: 343-349.

Lane, P.R. (1997). Inflation in Open Economics, Journal of International Economics 42, 327–347. DOI: 10.1016/j.econlet.2005.06.016

Okay, E., Baytar R., Sarıdoğan, E. (2012). The Effects of the Exchange Rate Changes on The Current Account Balance in the Turkish Economy. İktisat, İşletme ve Finans, 27 (310), 79-101. doi: 10.3848/iif.2012.310.3069

Sachsida, A., Galrao, F., Loureiro, P.R.A., (2003). Does Greater Trade Openness Reduce Inflation? Further Evidence Using Panel Data Techniques. Economics Letters, 81: 315-19. Doi: 10.1016/S0165-1765(03)00211-8

Samimi, A.J., Ghaderi S., Hosseinzadeh R., Nademi Y. (2011). Openness and Inflation: New Emprical Panel Data Evidence. Economics Letter, 117: 573-577. Doi: 10.1016/j.econlet.2012.07.028

Triffin, R., Grubel, H. (1962). The Adjustment Mechanism to Differential Rates of Monetary Expansion among the Countries af The European Economic Community. Review of Economics and Statistics, 44: 486-91.

UNESCAP (2009). Trade Statistics In Policymaking – A Handbook Of Commonly Used Trade Indices And Indicators- Revised Edition, Prepared By Mia Mikic and John Gilbert, UN Publications, St/ESCAP/2559, NY:USA.

Whitman, M.V.N. (1969). Economic Openness and International Financial Flows. Journal of Money, Credit and Banking, 1 (4): 727-49.

Zakaria, M. (2010). Openness and Inflation: Evidence From Time Series Data. Doğuş Üniversitesi Dergisi, 11(2): 313-322.

Published
2016-04-20
How to Cite
Atabay, R. (2016). The Relationship between Trade Openness and Inflation in Turkey. International Journal of Research in Business and Social Science (2147-4478), 5(3), 137-145. https://doi.org/10.20525/ijrbs.v5i3.464
Section
Articles