Investigating the Causal Relationship between Inflation and Trade Openness using Toda–Yamamoto Approach: Evidence from Zambia

Chibvalo Zombe, Lincoln Daka, Christopher Phiri, Oliver Kaonga, Francis Chibwe, Venkatesh Seshamani

Abstract


The paper examines whether a significant relationship exists between inflation and trade openness in Zambia over the period 1985 to 2015. We use the Toda-Yamamoto approach to Granger causality to test for a causal relationship between inflation and trade openness. The results establish a bi-directional causality between inflation and trade openness. Further, there exists a positive relationship between inflation and trade openness in Zambia. Our findings stress the importance for central banks to understand the consequences of international trade for domestic inflation.

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This work is licensed under Creative Commons Attribution 3.0 License.

Mediterranean Journal of Social Sciences ISSN 2039-9340(Print) ISSN 2039-2117(Online)

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