Trade Openness and Inflation: An Empirical Evidence of Thailand
This paper examining the “Romer’s hypothesis” using the data of Thailand. We followed the model proposed by Solomon and de Wet (2004). We found that all variables are I(1) and, based on the method of cointegration analysis provided by Johansen (1988), there exists one long-run equilibrium relationship. This long-run relationship confirms that Romer’s hypothesis holds in Thailand. Trade openness and repurchasing rate can be used as tools to control for core inflation in the long-run. Core consumer price index, GDP and exchange rate in Thai Baht per US dollar are weak exogenous.
Index Terms— Romer’s hypothesis, Openness, trade, inflation, cointegration, Thailand