Trends in Trade Openness and Inflation Volatility Across European Countries

Abstract

This research quantitatively examines the relationship between globalisation and financial instability, focusing on two variables: trade openness relative to GDP and inflation volatility (proxied by annual CPI changes) across six developed and developing European countries between 2013 and 2023. This research shows the empirical relationship between trade openness and inflation stability, without accounting for other drivers such as monetary policy or capital flows. It examines the questionable relationship between globalisation and financial instability across the selected economies, offering insights into their differing vulnerabilities. Based on secondary data collected from reliable sources, we conducted Pearson correlation, regression, and trend analyses to establish these dynamics. Primary results reveal a stronger positive relationship between trade openness and inflation fluctuations in developed countries, particularly France and Germany, than in developing countries, including Hungary and Romania, which experienced more synchronised trends. These findings provide descriptive evidence of country-level differences in the relationship between trade openness and inflation volatility. They serve as a basis for further research rather than for drawing strong policy conclusions.