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Is there an Explanation for the Current Inflation(*)
Published online by Cambridge University Press: 17 August 2016
Extract
For the last 25 years the industrial countries of the West have experienced continuous rises in price levels. However, as shown in Table 1, price indexes rose moderately until the end of the sixties but show a sharp acceleration from then onwards. In this paper attempts are made to identify and explain the main causes of that acceleration. It is, of course, obvious that in every country special factors and circumstances contributed to differences in national inflation rates. These factors we shall neglect.
In a similar effort Nordhaus (1972) emphasized that it is difficult to accept the large number of special factors and theories offered to explain the worldwide inflationary phenomenon. After testing, and rejecting as generally applicable, several hypotheses (the monetarist theory, the naive Phillips curve, the expectations Phillips curve, frustration theories, and the Scandinavian model) Nordhaus offers his own interpretation. In a world of interdependent economies a disturbance in one part of the world tends to be transmitted to other parts of the world through linkages in commodity trade and in financial markets. The particular disturbance identified by Nordhaus is the abrupt acceleration of the U.S. price level around 1968. While, as can again be seen from Table 1, U.S. prices were more stable than world market prices before 1968 this was no longer true after 1968.
- Type
- Research Article
- Information
- Recherches Économiques de Louvain/ Louvain Economic Review , Volume 40 , Issue 2 , 1974 , pp. 117 - 138
- Copyright
- Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1974
Footnotes
(*)
The author has benefitted from discussions with A. Kervyn de Lettenhove, R. Schmalensee, and G. Vila. None of them is in any way responsible for opinions or errors in the paper.
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