Whereas engaged on one other mission, I discovered this attention-grabbing correlation between the IMF’s “Measurement of Mixture Commerce Restrictions” (MATR) (Estafania-Flores, Furceri, Hannan, Ostry and Rose (2022)) and the Chinn-Ito (JDE 2006) monetary openness measure (KAOPEN).
Every unit change in KAOPEN is related to a 2.5 unit change in MATR (inverted). This estimate is comparatively unchanged (2.4, t-stat = 98) with the inclusion of time mounted results (adj-R2 = 0.69). With this diploma of correlation, it’s typically troublesome to tell apart which variable is vital within the a number of regression when each are included on the precise facet (i.e. multicollinearity).
The time sequence mannequin of the imply (worldwide) worth of the 2 variables can also be attention-grabbing.
Determine 2: Y – Chinn-Ito KAOPEN common, X10 – Common MATR (inverted, divided by 10) for Rising Markets/Creating Economies (EMDE). Greater values of every variable point out better openness. Supply: Chinn ItoAnd MAT.