Journal of Political Economy Vol. 86 No. 5 1978
International Transmission of Stagflation under Fixed and Flexible Exchange Rates
Abstract
This paper studies the transmission of economic fluctuations under flexible and fixed exchange rates. In a model incorporating short-run and long-run Phillips curves, two channels of interdependence are studied: one through the balance of payments and the other through changes in the terms of trade and wage-price spirals. Under fixed rates both channels work; under flexible rates the second channel still works, although the first is blocked. While a recession in one country tends to be transmitted as a recession in the other under fixed rates, it tends to be transmitted as stagflation in the other under flexible rates.
- DOI
- 10.1086/260716
- Volume
- 86
- Issue
- 5
- Pages
- 877-895
- Language
- en
- Sources
- openalex crossref