this is not the case. We find that the “Freedom in the World”-index is only weakly significant and does not strongly change the effect of openness, productivity and its interaction.
A similar concern is the effect of wars. Wars might force a country to reduce international trade and drive up inflation. Controlling for this with the inclusion of a war dummy, we find that the dummy is not significant.
Table 2.5 addresses the concern that the results may be sensitive to the choice of periods.
We split the sample period in two parts of roughly equal lengths. The split at 1989/1990 follows Kose et al. (2003). Some of the results are less strongly significant in the first period (1972 to 1989), which is likely due to a much slower pace of globalization during that period.
Results in the second period (1990 to 2009) however are strongly significant and quite similar to those of the whole sample. Following this temporal split, Table 2.6 shows the results for a geographical split by comparing OECD and non-OECD countries. Among several geograph-ical robustness checks which we do not all report here, this one seems the most interesting since it shows that the effect exists for high and low income countries. Results hold in this analysis.
Table 2.7 is concerned with the possibility that the approximation of productivity growth with growth in per capita GDP is to rough to produce reliable results. The regression there-fore includes only the 67 countries for which TFP data are available in Kose et al. (2009).
Again, results are similar to the main regression. Tables 2.8 and 2.9 follow the same idea.
The variables for exchange rate regimes and institutional quality are replaced by alternative measures. In the case of exchange rate regimes we use data from Reinhart and Rogoff (2002) and in the case of institutional quality we use data from from the International Country Risk Guide. As before results are not strongly affected.
reveals a significant effect of openness-induced productivity increase on inflation. Using GMM and directly controlling for institutional quality we give strong evidence that results are robust to omitted variable bias and reverse causality.
As a consequence of our result the question arises how sustainable the low levels of inflation are. An increase in openness leads to an acceleration in productivity. This however is not a structural change to the economy, it lasts only as long as openness increases. Once openness stabilizes, theory predicts that inflation should rise to a higher level, because productivity growth is no longer aided by firm selection from additional foreign competition. We can draw a policy implication from this. Once openness levels out, the additional downward pressure it had on inflation disappears. Central banks will have to adjust for this if they aim to keep inflation at very low levels.
Appendix to Chapter 2 2.A Simple Derivations
Average Productivity at Home
˜
ϕ(ϕ∗) =
"
ϕ∗k (ϕm(t))k
Z ∞ ϕ∗
ϕσ−1k(ϕm(t))k ϕk+1 dϕ
#σ−11
=
"
ϕ∗kk Z ∞
ϕ∗
ϕσ−1 ϕk+1dϕ
#σ−11
=
"
ϕ∗kk Z ∞
ϕ∗
ϕσ−k−2dϕ
#σ−11
=
"
ϕ∗kk
1
σ−k−1ϕσ−k−1
∞ ϕ∗
#σ−11
=
ϕ∗k k
k−(σ−1)ϕ∗σ−1−k σ−11
=
k
k−(σ−1)ϕ∗σ−1 σ−11
=
k k−(σ−1)
σ−11 ϕ∗
Note that h k
k−(σ−1)
iσ−11
>0.
˜
ϕ(ϕ∗x) = ϕ˜ τ fx
f σ−11
ϕ∗
!
=
k
k−(σ−1)τσ−1fx
f ϕ∗σ−1 σ−11
=
k k−(σ−1)
fx
f σ−11
τ ϕ∗
Probability of Exporting
px= 1−G(ϕ∗x) 1−G(ϕ∗) =
(ϕm(t)) ϕ∗x
k
(ϕ
m(t)) ϕ∗
k = ϕ∗k
ϕ∗kx = 1 (τ f∗)k
Average total productivityInserting the definitions ofNtot andNx into the definition of average total productivity (2.24) we can write
˜ ϕtot=
1
1 +px[ ˜ϕσ−1+px(τ−1ϕ˜x)σ−1] σ−11
. (2.50)
Substituting in the expressions from (2.20), (2.21) and (2.23) we obtain
˜ ϕtot =
1
1 + (τ f∗)−k[(k∗ϕ∗)σ−1+ (τ f∗)−k(k∗f∗ϕ∗)σ−1] σ−11
= k∗ϕ∗ τkf∗k+f∗σ−1 τkf∗k+ 1
!σ−11 .
The zero cutoff profit function (ZCP)
¯
π = f ·
ϕ(ϕ˜ ∗) ϕ∗
σ−1
−1
!
+pxfx·
ϕ(ϕ˜ ∗x) ϕ∗x
σ−1
−1
!
= f k∗ϕ∗
ϕ∗ σ−1
−f + 1 (τ f∗)kfx
k∗f∗τ ϕ∗ f∗τ ϕ∗
σ−1
− 1 (τ f∗)kfx
= f
k k−(σ−1)
−f+ 1 (τ f∗)kfx
k k−(σ−1)
− 1 (τ f∗)kfx
=
f+ 1 (τ f∗)kfx
k k−(σ−1)
−
f+ 1 (τ f∗)kfx
=
f+ 1 (τ f∗)kfx
k
k−(σ−1)−1
=
f+ 1 τk
fx
f σ−1k
fx
σ−1 k−(σ−1)
=
f+ 1
τkfσ−1−k f1−
−k
x σ−1
σ−1 k−(σ−1)
2.B Graphical Appendix
Figure 2.3: GDP Growth and Productivity Growth for 67 Countries.
Sources: WDI, Kose et al. (2009) and authors’ calculation.
2.C Tables
FE GMM
OLS OLS-Cluster Diff GMM System GMM
(1) (2) (3) (4) (5) (6) (7) (8)
Inflation inertia 0.6430*** 0.5625*** 0.6430*** 0.5625*** 0.6523*** 0.5253*** 0.6608*** 0.5336***
[52.9460] [39.3526] [20.1036] [18.9087] [17.6712] [12.5015] [17.7495] [12.8658]
∆ ln Openness -0.0492*** -0.0472*** -0.0492*** - 0.0472*** -0.0474*** -0.0362*** -0.0464*** -0.0362***
[6.5049] [5.8091] [3.6929] [3.5399] [3.6251] [2.7134] [3.5415] [2.7734]
∆ ln Productivity -0.1029*** -0.1224*** -0.1029*** -0.1224*** -0.1139*** -0.1014*** -0.1070*** -0.1118***
[6.5853] [7.1297] [3.4636] [3.9534] [3.6862] [3.1726] [3.4678] [3.4080]
∆ ln Productivity * ∆ ln Openness -0.2976*** -0.5016*** -0.2976*** -0.5016*** -0.3247*** -0.4357*** -0.3088*** -0.4365***
[4.2012] [6.0995] [2.6665] [3.8088] [3.0452] [3.1772] [2.7878] [3.3807]
∆ ln Money supply 0.1040*** 0.1040*** 0.0826*** 0.0814***
[14.4981] [4.8848] [3.6762] [3.8442]
Exchange-rate regimes -0.0056*** -0.0056** -0.0034 -0.0050
[3.4461] [2.4960] [0.9000] [1.4227]
Inflation targeting -0.0178*** -0.0178** -0.0654*** -0.0108**
[3.1214] [2.5460] [2.9503] [2.3226]
Constant 0.0654*** 0.0841*** 0.0654*** 0.0841*** 0.0182*** 0.0250**
[11.3280] [10.7757] [12.7182] [8.5741] [6.0392] [2.4140]
Observations 3,960 3,106 3,960 3,106 3,833 2,868 3,960 3,106
Country Fixed Effects Yes Yes Yes Yes No No No No
Time Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes
R-squared 0.5208 0.5670 0.5208 0.5670
Number of countries 123 121 123 121 123 118 123 121
t-statistics in brackets; *** p<0.01, ** p<0.05, * p<0.1
Table 2.3: Main Regression Results
80
FE GMM
OLS OLS-Cluster Diff GMM System GMM
(1) (2) (3) (4) (5) (6) (7) (8)
Inflation inertia 0.6184*** 0.5436*** 0.6184*** 0.5436*** 0.6227*** 0.4846*** 0.6400*** 0.5403***
[43.8728] [32.9578] [18.7303] [17.5372] [14.3297] [10.2958] [15.0228] [13.0303]
∆ ln Openness -0.0524*** -0.0491*** -0.0524*** -0.0491*** -0.0460*** -0.0337** -0.0489*** -0.0398***
[6.0975] [5.3073] [3.6410] [3.3416] [3.2601] [2.2749] [3.4626] [2.8183]
∆ ln Productivity -0.1005*** -0.1182*** -0.1005*** -0.1182*** -0.1122*** -0.0953*** -0.1033*** -0.1086***
[5.5915] [6.0241] [3.0369] [3.5834] [3.2040] [2.7717] [2.9095] [2.9829]
∆ ln Productivity * ∆ ln Openness -0.2984*** -0.5237*** -0.2984** -0.5237*** -0.3291*** -0.4481*** -0.3277*** -0.4715***
[3.7570] [5.6893] [2.5174] [3.8775] [2.8073] [3.0509] [2.7314] [3.2326]
∆ ln Money supply 0.1074*** 0.1074*** 0.0823*** 0.0870***
[12.9516] [4.4642] [3.2064] [3.6772]
Exchange-rate regimes -0.0070*** -0.0070** -0.0040 -0.0064
[3.4527] [2.5285] [0.8140] [1.3365]
Inflation targeting -0.0193** -0.0193* -0.0666** -0.0231***
[2.2769] [1.9786] [2.4573] [3.1342]
Quality of institutions 0.0128** 0.0129* 0.0128** 0.0129* 0.0039 -0.0102 0.0088 0.0252*
Freedom house index [2.0132] [1.7904] [2.1560] [1.7360] [0.1710] [-0.4579] [0.5235] [1.8097]
War dummy 0.0154*** 0.0159*** 0.0154** 0.0159** 0.0013 -0.0351 0.0128 0.0071
[2.9779] [2.7165] [2.3653] [2.2221] [0.0716] [-1.5029] [1.0465] [0.3994]
Constant 0.0755*** 0.0812*** 0.0755*** 0.0812*** 0.0104 0.0107
[10.3725] [8.2259] [10.9706] [6.5129] [0.9489] [0.6015]
Observations 3,141 2,431 3,141 2,431 3,016 2,214 3,141 2,431
R-squared 0.4700 0.5284 0.4700 0.5284
Country Fixed Effects Yes Yes Yes Yes No No No No
Time Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes
Number of countries 121 118 121 118 121 115 121 118
t-statistics in brackets; *** p<0.01, ** p<0.05, * p<0.1
Table 2.4: Robustness Check: Including Institutional and Conflict Dummies as Controls
81
FE GMM
OLS OLS-Cluster Diff GMM System GMM
(1) (2) (3) (4) (5) (6) (7) (8)
1973-1989 1990-2009 1973-1989 1990-2009 1973-1989 1990-2009 1973-1989 1990-2009 Inflation inertia 0.4678*** 0.5203*** 0.4678*** 0.5203*** 0.4429*** 0.4786*** 0.6406*** 0.4982***
[18.3761] [27.8058] [10.3446] [13.5300] [5.6286] [8.0827] [12.8543] [9.0285]
∆ ln Openness -0.0050 -0.0795*** -0.0050 -0.0795*** -0.0103 -0.0643*** -0.0027 -0.0614***
[0.3879] [7.7341] [0.2831] [5.3894] [-0.4797] [3.6292] [0.1319] [3.8390]
∆ ln Productivity -0.0998*** -0.1400*** -0.0998*** -0.1400*** -0.0773* -0.1305*** -0.1095** -0.1281***
[3.8372] [5.9018] [2.7177] [2.8924] [1.8535] [2.6781] [2.3809] [2.7768]
∆ ln Productivity * ∆ ln Openness -0.3447** -0.5276*** -0.3447* -0.5276*** -0.3069 -0.4305** -0.4608* -0.3741***
[2.1239] [5.6656] [1.6743] [3.5474] [1.3241] [2.2748] [1.7498] [2.6916]
∆ ln Money supply 0.0778*** 0.1028*** 0.0778*** 0.1028*** 0.0409 0.0861** 0.0856*** 0.0809***
[6.6163] [11.1253] [3.0128] [3.3508] [1.3103] [2.5250] [3.3402] [2.6424]
Exchange-rate regimes -0.0068** 0.0001 -0.0068* 0.0001 0.0045 -0.0062 -0.0065 -0.0075*
[2.1456] [0.0317] [1.7327] [0.0217] [0.7520] [1.3462] [1.2016] [1.7138]
Inflation targeting -0.0082 -0.0082 -0.0573*** -0.0123**
[1.1867] [1.2168] [2.7940] [2.3312]
Constant 0.0627*** 0.0143* 0.0627*** 0.0143 0.0381** 0.0335**
[5.7269] [1.9577] [4.5696] [1.2610] [2.5575] [2.6031]
Observations 1,308 1,798 1,308 1,798 1,167 1,701 1,308 1,798
R-squared 0.3459 0.5414 0.3459 0.5414
Country Fixed Effects Yes Yes Yes Yes No No No No
Time Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes
Number of countries 105 121 105 121 101 116 105 121
t-statistics in brackets; *** p<0.01, ** p<0.05, * p<0.1
The division into periods follows Kose (2003). The second period coincides with the time of rapid globalization.
Table 2.5: Robustness Check: Sample Split into Time Intervals
82
FE GMM
OLS OLS-Cluster Diff GMM System GMM
(1) (2) (3) (4) (5) (6) (7) (8)
OECD Non-OECD OECD Non-OECD OECD Non-OECD OECD Non-OECD
Inflation inertia 0.6351*** 0.5341*** 0.6351*** 0.5341*** 0.5925*** 0.4727*** 0.6037*** 0.5017***
[27.0993] [31.6248] [14.6151] [15.2939] [10.8707] [10.4613] [16.3752] [10.8791]
∆ ln Openness -0.0917*** -0.0446*** -0.0917** -0.0446*** -0.0963** -0.0311** -0.0846* -0.0344**
[3.6025] [4.9748] [2.0846] [3.1982] [2.3517] [2.3059] [1.8650] [2.5638]
∆ ln Productivity -0.1484*** -0.1098*** -0.1484** -0.1098*** -0.1688** -0.0855*** -0.1678*** -0.1020***
[2.8287] [5.7760] [2.5774] [3.3521] [2.7161] [2.6937] [3.0951] [2.9873]
∆ ln Productivity* ∆ ln Openness -2.4745*** -0.4802*** -2.4745 -0.4802*** -2.3355 -0.4039*** -2.6468* -0.4153***
[4.8054] [5.3964] [1.6804] [3.5843] [1.5099] [3.0391] [1.7494] [3.2741]
∆ lnMoney supply 0.1183*** 0.0981*** 0.1183*** 0.0981*** 0.1299*** 0.0621*** 0.1331*** 0.0714***
[10.9889] [11.4150] [4.2189] [4.1581] [4.2063] [3.4656] [4.5863] [3.3747]
Exchange-rate regimes -0.0018 -0.0045** -0.0018 -0.0045 0.0029 -0.0050 -0.0008 -0.0052
[0.7585] [2.2201] [0.6778] [1.6072] [0.7377] [1.0903] [0.2158] [1.3383]
Inflation targeting -0.0043 -0.0247** -0.0043 -0.0247** -0.0172* -0.0423** -0.0044 -0.0035 [0.8575] [2.4431] [0.8188] [2.2578] [2.0224] [2.0058] [1.3704] [0.4616]
Constant 0.0250** 0.0819*** 0.0250*** 0.0819*** 0.0066 0.0284**
[2.3005] [8.1840] [3.2305] [6.1585] [0.6312] [2.5204]
Observations 672 2,434 672 2,434 623 2,245 672 2,434
R-squared 0.8541 0.5004 0.8541 0.5004
Country Fixed Effects Yes Yes Yes Yes No No No No
Time Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes
Number of countries 26 95 26 95 26 92 26 95
t-statistics in brackets; *** p<0.01, ** p<0.05, * p<0.1
Table 2.6: Robustness Check: Sample Split into OECD vs Non-OECD Countries
83
FE GMM
OLS OLS-Cluster Diff GMM System GMM
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Inflation inertia 0.6621*** 0.5970*** 0.6621*** 0.5970*** 0.5771*** 0.6816*** 0.6075*** 0.6800*** 0.5870*** 0.5723***
[40.4676] [31.9771] [13.2589] [15.0265] [14.4749] [11.0967] [9.4165] [11.4973] [9.3502] [9.9459]
∆ ln Openness -0.0755*** -0.0695*** -0.0755*** -0.0695*** -0.0715*** -0.0729*** -0.0737*** -0.0713*** -0.0666*** - 0.0649**
[6.7430] [5.8650] [3.7218] [2.9866] [2.8185] [3.5924] [3.0788] [3.5887] [2.9982] [2.5965]
∆ ln Productivity -0.1577*** -0.1853*** -0.1577*** -0.1853*** -0.1771*** -0.1641*** -0.1804*** -0.1683*** -0.1921*** -0.1744***
Solow’s residual [5.9528] [6.5251] [3.3879] [3.7102] [3.7452] [3.2604] [3.0509] [3.3589] [3.3982] [3.1760]
∆ ln Productivity * ∆ ln Openness -0.5142*** -0.7071*** -0.5142* -0.7071** -0.7667*** -0.5511** -0.5501** -0.5465** -0.6202** -0.7439***
[3.0291] [4.0108] [1.8108] [2.3054] [2.6611] [2.1125] [2.1217] [2.0609] [2.3500] [2.8707]
∆ ln Money supply 0.0973*** 0.0973*** 0.0982*** 0.0904*** 0.0876*** 0.0960***
[10.5221] [3.8703] [3.8683] [3.9790] [3.4661] [4.2282]
Exchange-rate regimes -0.0042** -0.0042* -0.0047* 0.0025 0.0013 0.0021
[2.2343] [1.6880] [1.7189] [0.5523] [0.2960] [0.4303]
Inflation targeting -0.0105* -0.0105 -0.0165* -0.0028 -0.0108** -0.0183**
[1.7046] [1.4071] [1.6942] [0.1043] [2.1282] [2.3823]
Quality of institutions 0.0197** 0.0208
Freedom house index [2.0644] [0.9770]
War dummy 0.0185** 0.0207
[2.4978] [1.2016]
Constant 0.0369*** 0.0250*** 0.0369*** 0.0250*** 0.0164 0.0161*** 0.0094 -0.0123
[5.5096] [3.0515] [3.1166] [2.9639] [1.1493] [3.4385] [0.8168] [0.5135]
Observations 2,136 1,743 2,136 1,743 1,487 2,069 1,609 2,136 1,743 1,487
R-squared 0.5592 0.5999 0.5592 0.5999 0.5658
Country Fixed Effects Yes Yes Yes Yes No No No No No No
Time Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Number of countries 67 66 67 66 65 67 66 67 66 65
t-statistics in brackets; *** p<0.01, ** p<0.05, * p<0.1
Table 2.7: Robustness Check: With Productivity Data from Kose (2009)
84
FE GMM
OLS OLS-Cluster Diff GMM System GMM
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Inflation inertia 0.6313*** 0.5114*** 0.6313*** 0.5114*** 0.4996*** 0.6435*** 0.5004*** 0.6504*** 0.4930*** 0.4903***
[49.6312] [30.0054] [19.3218] [13.3610] [13.5807] [17.0186] [9.9319] [17.0292] [10.6883] [10.9030]
∆ ln Openness -0.0502*** -0.0480*** -0.0502*** -0.0480*** -0.0445** -0.0480*** -0.0483*** -0.0470*** -0.0475*** -0.0426**
[6.4180] [4.5325] [3.6864] [2.7302] [2.4502] [3.5601] [2.7192] [3.4638] [2.8201] [2.5327]
∆ ln Productivity -0.1061*** -0.1545*** -0.1061*** -0.1545*** -0.1462*** -0.1180*** -0.1502*** -0.1130*** -0.1532*** -0.1373***
[6.5350] [6.1973] [3.5000] [4.2924] [4.1381] [3.7627] [3.2788] [3.5575] [3.6312] [3.4677]
∆ ln Productivity * ∆ ln Openness -0.2937*** -0.5345*** -0.2937*** -0.5345*** -0.7190*** -0.3329*** -0.5101** -0.3237*** -0.5629*** -0.6624***
[4.0308] [3.8761] [2.6169] [2.7238] [3.6362] [3.1164] [2.5876] [2.9389] [2.8408] [3.3876]
∆ ln Money supply 0.0910*** 0.0910*** 0.0904*** 0.0758*** 0.0767*** 0.0806***
[10.6189] [4.5419] [4.5084] [4.3698] [4.1241] [5.0148]
Exchange rate regimes 0.0221*** 0.0221*** 0.0225*** 0.0241*** 0.0230*** 0.0255***
ERR of Reinhart and Rogoff (2002) [16.1316] [7.4686] [7.0083] [5.9621] [6.3679] [6.8637]
Inflation targeting -0.0303*** -0.0303*** -0.0344*** -0.0831** -0.0381*** -0.0509***
[5.3667] [4.1244] [4.0172] [2.4990] [5.9553] [6.0430]
Quality of institutions 0.0079 0.0219
Freedom house index [0.8001] [1.6184]
War dummy 0.0124* -0.0004
[1.9572] [0.0349]
Constant 0.0860*** 0.0351*** 0.0860*** 0.0351*** 0.0090 0.0235*** -0.0229*** -0.0442***
[14.3529] [5.1112] [14.2070] [3.3231] [0.8207] [6.7293] [2.8204] [3.5409]
Observations 3,715 2,000 3,715 2,000 1,736 3,588 1,919 3,715 2,000 1,736
R-squared 0.5021 0.6353 0.5021 0.6353 0.6038
Country Fixed Effects Yes Yes Yes Yes No No No No No No
Time Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Number of countries 123 67 123 67 65 123 67 123 67 65
t-statistics in brackets; *** p<0.01, ** p<0.05, * p<0.1
Table 2.8: Robustness Check: Exchange-Rate Regime Classification Following Reinhart and Rogoff (2002)
85
FE GMM
OLS OLS-Cluster Diff GMM System GMM
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Inflation inertia 0.6313*** 0.5520*** 0.6313*** 0.5520*** 0.5923*** 0.6435*** 0.5196*** 0.6504*** 0.5295*** 0.5697***
[49.6312] [36.9592] [19.3218] [18.1574] [14.4649] [17.0186] [12.0114] [17.0292] [12.7047] [8.9523]
∆ ln Openness -0.0502*** -0.0473*** -0.0502*** -0.0473*** -0.0696*** -0.0480*** -0.0379*** -0.0470*** -0.0372*** -0.0640**
[6.4180] [5.6105] [3.6864] [3.4271] [2.7126] [3.5601] [2.6640] [3.4638] [2.6709] [2.5448]
∆ ln Productivity -0.1061*** -0.1272*** -0.1061*** -0.1272*** -0.1916*** -0.1180*** -0.1028*** -0.1130*** -0.1188*** -0.1932***
[6.5350] [7.1229] [3.5000] [4.0475] [3.7293] [3.7627] [3.1923] [3.5575] [3.5883] [3.3625]
∆ ln Productivity * ∆ ln Openness -0.2937*** -0.5028*** -0.2937*** -0.5028*** -0.7557*** -0.3329*** -0.4086*** -0.3237*** -0.4251*** -0.8356***
[4.0308] [5.9382] [2.6169] [3.7920] [3.1244] [3.1164] [3.0027] [2.9389] [3.2406] [3.8474]
∆ ln Money supply 0.1066*** 0.1066*** 0.0972*** 0.0826*** 0.0823*** 0.0871***
[14.2563] [4.8134] [3.9060] [3.5950] [3.7904] [3.4720]
Exchange-rate regimes -0.0061*** -0.0061** -0.0051** -0.0010 -0.0052 0.0010
[3.4055] [2.3799] [2.0364] [0.2255] [1.2417] [0.2288]
Inflation targeting -0.0175*** -0.0175** -0.0134* -0.1071*** -0.0134*** -0.0070
[2.7782] [2.3424] [1.8533] [3.0454] [2.6975] [1.0126]
Quality of Institutions -0.0021* -0.0031*
ICRG Index [1.9169] [1.7772]
War dummy 0.0118* 0.0159
[1.9318] [0.9449]
Constant 0.0860*** 0.0859*** 0.0860*** 0.0859*** 0.0495*** 0.0235*** 0.0338*** 0.0385**
[14.3529] [10.5105] [14.2070] [8.2353] [3.3072] [6.7293] [2.8380] [2.1459]
Observations 3,715 2,898 3,715 2,898 1,664 3,588 2,671 3,715 2,898 1,664
R-squared 0.5021 0.5513 0.5021 0.5513 0.6088
Country Fixed Effects Yes Yes Yes Yes No No No No No No
Time Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Number of countries 123 119 123 119 62 123 118 123 119 62
t-statistics in brackets; *** p<0.01, ** p<0.05, * p<0.1
Table 2.9: Robustness Check: Institutional Quality Data from the International Country Risk Guide (ICRG)
86
Variables Obs Mean Std. Dev. Min Max
∆ln CPI 4403 .0869042 .0960851 -.276732 .8474171
∆ln Openness 4322 .0132791 .1328754 -1.416514 2.233043
∆ln Productivity 4322 .0183262 .0633431 -.4491743 .7804412
∆ln Money supply 4306 .1492613 .1580446 -1.118959 2.229269
Exchange regime 3671 2.428494 .8095108 1 3
Inflation targeting 4788 .0484545 .214747 0 1
Freedom house 3578 .5480716 .3721498 0 1
War dummy 4551 .1551307 .3620691 0 1
Table 2.10: Summary Statistics
Algeria Australia Austria Bahamas, The Bahrain Bangladesh Barbados Belgium Belize Bhutan Botswana Brunei Darussalam Burkina Faso Burundi Cameroon Canada Cape Verde Central African Republic Chad China Colombia Congo, Rep. Costa Rica Cote d’Ivoire Cyprus Denmark Dominica Dominican Republic Ecuador Egypt, Arab Rep. El Salvador Equatorial Guinea Ethiopia Fiji Finland France Gabon Gambia, The Ghana Greece Grenada Guatemala Guinea-Bissau Haiti Honduras Hong Kong SAR, China Hungary Iceland India Indonesia Iran, Islamic Rep. Ireland Israel Italy Jamaica Japan Jordan Kenya Korea, Rep. Kuwait Lao PDR Lesotho Libya Luxembourg Madagascar Malawi Malaysia Mali Malta Mauritania Mau-ritius Mexico Morocco Myanmar Nepal Netherlands Netherlands Antilles New Zealand Niger Nigeria Norway Pakistan Panama Papua New Guinea Paraguay Philippines Poland Portugal Qatar Romania Rwanda Samoa Saudi Arabia Senegal Seychelles Singapore Solomon Islands South Africa Spain Sri Lanka St. Kitts and Nevis St. Lucia St. Vincent and the Grenadines Sudan Suriname Swaziland Sweden Switzerland Syrian Arab Republic Tanzania Thailand Togo Tonga Trinidad and Tobago Tunisia Turkey Uganda United Kingdom United States Uruguay Vanuatu Venezuela, RB Yemen, Rep. Zambia
Table 2.11: List of Countries – Full Sample
Australia 1993, Canada 1991, Colombia 1999, Ghana 2007, Hungary 2001,Iceland 2001, Israel 1992, Korea, Rep. 1998, Mexico 1999, New Zealand 1990, Norway 2001, Philippines 2002, Poland 1998, Romania 2005, South Africa 2000, Sweden 1993, Switzerland 2000, Thailand 2000, Turkey 2006, United Kingdom 1992.
Table 2.12: List of Inflation Targeting Countries