- مبلغ: ۸۶,۰۰۰ تومان
- مبلغ: ۹۱,۰۰۰ تومان
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.
In this paper, we argue that the typical assumption of parameter homogeneity used in the empirical studies of the trade openness-Phillips curve correlation is not guaranteed to be valid from an ex ante theoretical perspective. We test this assumption with both panel data and time series analysis. Our results suggest that the validity of the parameter homogeneity assumption is highly questionable. When the parameter homogeneity assumption does not hold, reporting an average effect of trade openness on the slope of the Phillips curve can be very misleading. Significant effects with different signs can be averaged out while trade openness has indeed played a role in all sample countries. Relaxing the parameter homogeneity assumption, we find that trade openness has significantly changed the slope of the Phillips curve in several major industrial countries. In our model with both trade and financial openness, a significant effect of trade openness is found in Canada, France, Italy, Sweden and the United States.