The United States and World Stagflation: The Export and Import of Inflationary Pressures

Abstract

This article argues that while macroeconomic and monetary interdependence is certainly important, the previous tendency to overlook the significance of such factors for the U.S. economy has given way to frequent tendencies to exaggerate greatly their quantitative importance. The available systematic empirical studies suggest that the United States has neither exported as much inflation and unemployment to other countries as is frequently alleged in popular discussions, nor imported as much inflation and unemployment from abroad. While effects of such international factors as oil price and exchange-rate changes are far from trivial our inflation has been primarily homegrown and we cannot take fluctuations in the dollar as a clear indicator for the course of domestic policies.

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References

and Thomas D. Willett , International Liquidity Issues (Washington, DC: American Enterprise Institute, 1980).

2. Leroy Laney and Thomas D. Willett , The Political Economy of World Inflation: The Causes of Monetary Expansion in the Major Industrial Countries (Washington, DC: American Enterprise Institute, forthcoming).

3. See, for example, Charles Pigott , John Rutledge , and Thomas D. Willett , “Difficultires in Estimating the Inflationary Effects of Exchange Rate Changes,” in Sweeney and Willett, Studies on Exchange Rate Flexibility, and the other studies referenced there.

and Willett , International Liquidity Issues.

and Ronald I. McKinnon , “Dollar Stabilization and American Monetary Policy” American Economic Review, 70: 382-387 (May 1980).

6. C. Fred Bergsten , quoted in the Los Angeles Times, 10 Sept. 1981.

and Sweeney and Willett , Studies on Exchange Rate Flexibility.