Can openness be an engine of sustained high growth rates and inflation?: Evidence from Japan and Korea |
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| Institution: | 1. Department of Finance, Ocean University of China, China;2. Department of Accounting and Information, Ling Tung University, Taiwan;3. Department of Finance, Feng Chia University, Taiwan;1. School of Contemporary Chinese Studies, University of Nottingham, Jubilee Campus, Wollaton Road, Nottingham G8 1BB, UK;2. Department of Economics, University of Bath, Claverton Down, Bath BA2 7AY, UK;3. Department of Economics, University Jaume I, Avda. Sos Baynat s/n, 12071, Castellón, Spain;1. Economic Research Institute, The Bank of Korea, Seoul, South Korea;2. Department of Economics, California State University, Fullerton, CA, United States |
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| Abstract: | The effects of increasing openness on the growth rates of output and of the price level are examined for Japan and Korea. The framework of analysis is a seven-variable vector autoregressive (VAR) model, and the effects of changes in openness are evaluated by computing impulse response functions (IRFs). For both countries, shocks to trade openness are found to have significant, negative effects on economic growth and inflation in the short run, but no longer-run effects. Openness measures in financial markets also have negative effects on economic growth and inflation in Korea, whereas the effects are not significant in Japan. The findings appear consistent with some models in which a domestic economy may suffer a loss due to increased openness of an economy. |
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