Economic globalization and Its Effect on Inflation in Asian Developing Countries

In today’s world countries cannot isolate themselves from the world economy. The benefits of outward-looking policies which help in taking advantage of international trade and capital flows are obvious and there is evidently a move away from the typical closed economy structure in most of economies. Therefore, in recent years many researchers focused on the effects of globalization on different economic aspects, including its effect on inflation. Inflation is one of the serious problems in many countries, particularly in developing countries because it has obvious costs to an economic and social system. A high rate of inflation reduces the purchasing power and increases uncertainty in the economy and may adversely effect on the economic growth. So in this Study we attempt to examine the effect of economic globalization on inflation for a panel of 22 Asian developing countries. By using annual data from 1994 to 2014 and economic dimension of KOF index of globalization, the results show inverse and significant relationship between economic globalization and inflation.