| Summary: | 碩士 === 國立清華大學 === 經濟學系 === 101 === The negative relationship between trade openness and inflation was found by Romer(1993). Romer points that the unexpected monetary expansion will give rise in real exchange rate depreciation which is more harmful in open economy. Concerning this effect, monetary authority will have less incentive to operate expansionary monetary policy and result in lower inflation in open economy. According to Romer (1993), this paper extends the sample period from 1961 to 2007, finding after controlling exchange rate regimes, trade openness does not play a role to explain inflation; however, Exchange rate regimes act a key variable to account for cross-country inflation dynamics.
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