The Effect of Economic Globalization on Inflation in 15 OECD countries

The aim of this paper is to examine Romer (1993) hypothesis for a panel of 15 OECD countries over the 1993 to 2010 years. Hypothesis of Romer (1993) implies inverse relationships between degree of economic openness and inflation. Is it possible that economic globalization and higher degree of openness have been helping to drive down inflation? We use the economic dimension of KOF index as a proxy for economic globalization. A non-stationary panel technique and DOLS estimator employed to achieve this purpose. The results of empirical analysis indicate inverse relationship between economic globalization and inflation, so the Romer (1993) hypothesis supported by finding of present study.