The Effect of Openness on Inflation, Using Quantile Regression : (A Case Study of Iran)

The relationship between openness and inflation has been a subject of many studies, theoretical as well as empirical. Economists believe that the relationship between inflation and globalization has dual trace. Globalization, increase the effect of external factors in the inflation process and also reduces the role of internal factors. In recent years, despite rising global oil prices and expansionary monetary policies in most countries, world prices have been low and stable growth. And in Iran despite of highly expansionary policies, a relatively low and stable inflation trend has experienced. Economists explain this phenomenon by several reasons, such as the influences of countries inflation from the globalization process. The Degree of economy openness can be impressive as an indicator of globalization on domestic inflation rate. In this study some variables affect the inflation rate is examined using quantile regression for data from of 1942 to 2008. These variables are such as the degree of economy openness, exchange rates, imported inflation, growth, liquidity and of national production growth. Quantile regression studies the relation between inflation and economic openness in different quantiles of inflation levels. The results show a positive effect of trade openness on inflation when inflation is higher but no effect when inflation is lower. The positive relationship is stronger along with the inflation The evidences are robust to controlling wit bootstrapping and confirm using quantile regression in this model