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.