The Use of Monetary Policy for Internal and External strongBalancestrong.pdfVIP

This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Exchange Rates and International Macroeconomics Volume Author/Editor: Jacob A. Frenkel, ed. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-26250-2 Volume URL: /books/fren83-1 Publication Date: 1983 Chapter Title: The Use of Monetary Policy for Internal and External Balance in Ten Industrial Countries Chapter Author: Stanley W. Black Chapter URL: /chapters/c11380 Chapter pages in book: (p. 189 - 234) The Use of Monetary Policy for Internal and External Balance in Ten Industrial Countries Stanley W. Black 6.1 Introduction and Methodology The 1970s have seen not only a deterioration in the average mac- roeconomic performance of the industrialized countries but also in- creased dispersion about that average. For example, as the unweighted average inflation rate of a group of ten leading industrialized countries rose from 4.0 percent during 1963-70 to 8.9 percent during 1971-79, the dispersion of inflation rates as measured by the unweighted standard deviation rose from 0.8 percent to 2.5 percent. Similarly, as the un- weighted average unemployment rate among eight of the same countries rose from 2.7 percent during 1964-70 to 4.3 percent during 1971-79, its dispersion rose from 1.5 percent to 1.9 percent.1 While the increased dispersion of inflation rates has clearly led to and been associated with increased flexibility in exchange rates, it also appears to have led, at least in part, to the increased levels and dispersion of unemployment rates, as high-inflation countries have often been forced to adopt restrictive macroeconomic policies. The va