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The International Transmission of Inflation

Inflation became the dominant economic, social, and political problem of the industrialized West during the 1970s. This book is about how the inflation came to pass and what can be done about it. Certain to provoke controversy, it is a major source of new empirical information and theoretical conclusions concerning the causes of international inflation.

The authors construct a consistent data base of information for eight countries and design a theoretically sound model to test and evaluate competing hypotheses incorporating the most recent theoretical developments. Additional chapters address an impressive variety of issues that complement and corroborate the core of the study. They answer such questions as these: Can countries conduct an independent monetary policy under fixed exchange rates? How closely tied are product prices across countries? How are disturbances transmitted across countries?

The International Transmission of Inflation is an important contribution to international monetary economics in furnishing an invaluable empirical foundation for future investigation and discussion.

Table of Contents

I. Preliminaries
1. Introduction and Summary
Michael R. Darby and James R. Lothian
2. The Postwar Institutional Evolution of the International Monetary System
Anna J. Schwartz
3. The International Data Base: An Introductory Overview
James R. Lothian
4. The Timing of Monetary and Price Changes and the International Transmission of Inflation
Anthony Cassese and James R. Lothian
II. The Mark III International Transmission Model
5. The Mark III International Transmission Model: Specification
Michael R. Darby and Alan C. Stockman
6. The Mark III International Transmission Model: Estimates
Michael R. Darby and Alan C. Stockman
7. International Transmission of Monetary and Fiscal Shocks under Pegged and Floating Exchange Rates: Simulation Experiments
Michael R. Darby
8. The Importance of Oil Price Changes in the 1970s World Inflation
Michael R. Darby
9. Actual versus Unanticipated Changes in Aggregate Demand Variables: A Sensitivity Analysis of the Real-Income Equation
Michael R. Darby
III. Capital Flows, Sterilization, Monetary Policy, and Exchange Intervention
10. Sterilization and Monetary Control: Concepts, Issues, and a Reduced-Form Test
Michael R. Darby
11. Short-Run Independence of Monetary Policy under a Pegged Exchange-Rates System: An Econometric Approach
Daniel M. Laskar
12. Effects of Open Market Operations and Foreign Exchange Market Operations under Flexible Exchange Rates
Dan Lee
13. An Alternative Approach to International Capital Flows
Michael Melvin
IV. International Price Movements
14. International Price Behavior and the Demand for Money
Arthur E. Gandolfi and James R. Lothian
15. Movements in Purchasing Power Parity: The Short and Long Runs
Michael R. Darby
16. The United States as an Exogenous Source of World Inflation under the Bretton Woods System
Michael R. Darby
V. Conclusions
17. Conclusions on the International Transmission of Inflation
Michael R. Darby and James R. Lothian
Data Appendix
James R. Lothian with the assistance of Anthony Cassese and Laura Nowak
Author Index
Subject Index

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