تاثیر توافق نامه های تجارت آزاد بر نرخ تورم
Abstract
1- Introduction
2- Price effects of FTAs
3- The estimation results
4- Conclusion
References
Abstract
Most previous studies have examined extensively the economic effects of free trade agreements (FTAs) such as their effects on economic growth, income distribution across industries, price competitiveness for international trade, trade volume, and the price of a commodity, but not very much on inflation rates. This study empirically estimates how much FTAs affect domestic inflation rates. From the cross-country panel data analysis of 34 OECD countries over the period 1980-2014, the expansion of FTAs shows a significant negative effect on the Consumer Price Index inflation, which is more apparent than the traditionally used openness measure. The inflation reduction effect is more significant in countries with a low level of openness than those with a high level of openness.
Introduction
In recent decades, the inflation rates have been low in the OECD countries. In the 1980s, the average inflation rate of OECD countries was 10.6 percent, but it declined to 7.3 percent in the 1990s, 3.1 percent in the 2000s, and 1.8 percent in the 2010s.1 The reasons for this decline in consumer price inflation are likely to include various country-specific structural factors and external factors such as international commodity prices, crude oil prices, and low inflationary pressure from the slowdown of the world economy after the global financial crisis. Some argue that the expansion of low-priced Chinese exports produced with cheap labor may have contributed to the stabilization of global prices.2 Expansion of foreign trade means relatively low-priced imports of overseas goods, which stabilize domestic prices. The institutional change that has made a decisive contribution to the expansion of such trade is the proliferation of free trade agreements (FTAs). The main contents of bilateral or multilateral FTAs include the reduction of tariff rates and the easing or elimination of trade barriers, which could directly reduce the price of imported goods and contribute to the stabilization of consumer prices if imports were expanded. This study attempts to estimate quantitatively how much the expansion of FTAs, separately from the effect of international trade on inflation rates, affected the domestic consumer price inflation rate. The objective of this study is to analyze how much the expansion of FTAs affects the inflation rate of each country based on the panel data analysis of 34 OECD countries for 1980–2014. We examine how much additional FTAs have affected the inflation rate in addition to the effect of international trade on domestic inflation, which has traditionally been focused. This study will not only be an empirical study of one aspect of the benefits of the FTA, but it will also have an implication for predicting the future trend of inflation rate by examining quantitatively how much the inflation rate stabilizes down due to the FTA expansion. This paper is organized as follows. Section 2 examines the previous studies on the economic effects or the price stabilization effects of FTAs.