The title of this article is a riff off a publication of G. C. Harcourt’s 1974 piece, ‘The social consequences of inflation’. He wrote this in a period of the global economy that bears some strong similarities to our own contemporary phase when inflation is suddenly back in the global headlines. There is at least one significant difference: at that time, Harcourt highlighted inflation as the outcome of an excess of total demand in real terms over available supplies of goods and services when the potential workforces and existing stocks of capital goods were fully employed. Current inflationary pressures, by contrast, arise from the combination of specific sectoral supply bottlenecks, rising profit margins in oligopolistic global markets for food and fuel and financial speculation in these markets.

The Latin American debt crisis consumed the 1980s and was not restricted to Latin America. Starting from the August 1982 Mexican weekend, the crisis had three phases: Concerted Lending (1982-5), Baker Plan (1985-9) and Brady Plan (1989 to mid 1990s). This article describes the evolution of the debt strategy and the road to embracing debt write-downs at the end of the decade. In the absence of an external coordinating mechanism, four groups of parties had to reach agreement on any change in the strategy: the borrowing countries, their commercial bank lenders, the home-country authorities of those lenders, and the International Monetary Fund as the principal international institution. Each group could effectively veto any change in the strategy. This need for consensus is lesson number one from the 1980s for today. Lesson number two is that political economy aspects dictated that the strategy be implemented on a case-by-case basis. The article concludes with an application of these lessons to a similar, but even more global, potential debt crisis in the wake of the COVID pandemic.

There is no consensus on the existence of welfare gains from international monetary policy cooperation. This study adds to the debate by providing a new open macroeconomics model with incomplete exchange rate pass-through. We find that, from a global perspective, the welfare gains from international monetary policy cooperation arise with incomplete exchange rate pass-through. Furthermore, the country’s incentive for cooperation increases with its degree of exchange rate pass-through. Cooperation benefits small countries with high pass-through; however, it is disadvantageous to large countries with low pass-through. In addition, when there is in the absence of cooperation, fixed exchange rate regime is preferred for a country suffering from monetary uncertainty, particularly for small economies with high exchange rate pass-through.

This article offers a Japanese perspective on the debate about the international financial system immediately after the first oil shock of 1973–4. Using archival records from the OECD and Bank of Japan, I analyze the three key policy issues discussed at the meetings of Working Party 3 (WP3) of the OECD: petrodollar recycling, balance-of-payments adjustments, and the management of global growth. Documents show that the Japanese approach to capital controls, exchange rate management, state-led growth orientation and international banking strategies was rather strengthened by the impact of the oil shock. By 1975 the OECD viewed Japan, together with Germany and the United States, as one of the ‘locomotives’ that would trigger a revival of economic growth in the industrialized West.

EU Member States, particularly in the Euro Area, have been pushed to adopt more extensive and intrusive fiscal rules, but what is the evidence that the rules are succeeding? The EU level Stability and Growth Pact (SGP) has been – and remains – the most visible rule-book, but it has been complemented by a profusion of national rules and by new provisions on other sources of macroeconomic imbalance. Much of the analysis of rules has concentrated on their technical merits, but tends to neglect the political economy of compliance. This paper examines the latter, looking at compliance with fiscal rules at EU and Member State levels and at the rules-based mechanisms for curbing other macroeconomic imbalances. It concludes that politically driven implementation and enforcement shortcomings have been given too little attention, putting at risk the integrity and effectiveness of the rules.

The effects of the U.S. dollar exchange rate versus the Mexican peso are evaluated for four traded nonfarm-produced inputs (fertilizer, chemicals, farm machinery, and feed) in the U.S. Unit root tests suggest that the exchange rate and the four input price ratios support the presence of unit roots with a trend model but the presence unit roots can be rejected in the first difference model. This result is consistent with a fixed price/flex price conceptual framework, with industrial prices more likely to be unresponsive to the exchange rate than farm commodity prices.

These three invited papers examine the role that exchange rates may have in influencing commodity prices, input prices and farm income. The papers arguably represent one of the most important recent attempts to quantify and explain these new linkages. As U.S. and world agriculture moves from a period of high output prices to a period of lower prices, understanding the impact of macroeconomic variables on farm input costs and farm income will become more important. Further, it will be equally important for policy makers to undertake appropriate market interventions in order to have maximum effectiveness should this period of cost-price-squeeze continue to intensify. Each of the papers has something significant to contribute to the understanding and debate of these new linkages between agriculture, the macroeconomic environment, and the energy sector.

To what extent is the Euro Area common business cycle affected by the inclusion of the UK into this group? To answer this question, a semi-structural model estimated by the Kalman filter, which is robust to outliers and structural breaks, is used. We look at the correlations between business cycles taking potential phase shifts into account. On the one hand, a finding — coherent with existing literature — is that adding the UK to the euro group lowers correlations within the group. On the other hand, the UK cycle is increasingly linked to the Euro Area business cycle and has statistical properties that do not differ substantially from the Euro Area cycles.

Dans un modèle à deux pays où on considère le policy-mix en réponse à des chocs, on examine la question de savoir si le gain résultant de la coordination des politiques budgétaires entre pays est plus élevé en union monétaire qu'en change flexible. On montre tout d'abord que l'asymétrie des chocs peut contribuer à rendre le gain d'une telle coordination plus élevé en union monétaire qu'en change flexible. On montre aussi que le poids accordé par la banque centrale à la stabilisation de l'inflation par rapport au produit agrégé s'avère aussi jouer un rôle. S'il est élevé, il peut contribuer à rendre ce gain plus élevé en union moné

Dans un modèle à deux pays et à horizon infini, dans lequel la mobilité ducapital est imparfaite, on présente une analyse dynamique de la transmissioninternationale des chocs qui affectent les dépenses publiques. Trois typesde financements d’une augmentation des dépenses publiques sont comparés:l’imposition des salaires, l’imposition des revenus du capital à la sourceet l’imposition des revenus du capital selon le principe de taxation à larésidence. L’imposition des salaires ou des revenus du capital à la sourcecrée une réduction du produit dans le pays qui mène cette politique et uneaugmentation du produit à court terme à l’étranger. L’imposition des revenusdu capital de tous les résidents conduit, en introduisant un canalsupplémentaire de transmission internationale, à une baisse de la productionmondiale. Malgré cette baisse, le bien-être progresse dans le pays quiaugmente ses dépenses publiques.

L’article analyse la coopération monétaire en Europe comme une coalition (au sens de la théorie des jeux) au sein de l’économie mondiale. Le modèle de Canzoneri et Henderson sert de point de départ; il est enrichi, notamment par la prise en compte d’une fonction de création de la monnaie internationale, pour répondre à trois questions: La coordination des politiques monétaires européennes contribuera-t-elle à améliorer l’équilibre mondial, spécialement du point de vue de l’emploi? Quelles implications associer au refus d’accorder à l’objectif d’emploi une place explicite dans la formulation de la politique monétaire européenne conformément au traité de Maastricht? Quelles implications associer à la promotion de l’euro comme une monnaie internationale concurrente du dollar?

We examine proposals to introduce national insurance against unevenly distributed shocks in the European Community. This insurance would operate differently from tax and government spending activities that now yield regional insurance within countries, since these activities are mainly designed for other purpose such as income redistribution and general revenue-raising. According to our evidence, the appeal of such insurance is very limited because the risks are too highly correlated and there is an excessive chance that a country in difficulty would not receive aid. The costs of a continuing programme are likely to exceed the benefits.