This paper investigates the effect of economic globalization on inflation for a
panel of 21 developing countries over the 1993- 2010 years. One of the most
salient economic events in the past two decades has been the remarkable
decrease in inflation around the world. Global inflation has dropped from
around 30 percent a year in the early 1990s to under 4 percent today. Is it
possible that economic globalization and a higher degree of openness have
helped drive down inflation? We use the economic dimension of KOF index as a
proxy for economic globalization and overall the results of both OLS and DOLS
estimators show inverse and significant relationship between economic
globalization and inflation in these developing countries during 1993-2010.
