Inflation, Market Structure and Globalization. A Sectoral Study for Mexico
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Abstract
This article discusses the importance of market structure as a determinant of inflation. The research analyzes part of those called „necessary structural reforms” announced in recent years in Mexico. Taking into account the long tradition in openness generated in recent decades, I capture the sectoral level differences between openness and competition by considering 15 of 23 manufacturing sectors into the OECD industrial classification over the period 1990-2009. Estimations using panel data models shows that openness has a positive effect on inflation, this is, firms that import the most tend to increase the costs on their final products. However, inflation decreases when market competition increase.
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