Document Type

Article

Journal/Book Title/Conference

Economic Research Institute Study paper

Publisher

Utah State University

Publication Date

2-1-1986

Rights

Copyright for this work is held by the author. Transmission or reproduction of materials protected by copyright beyond that allowed by fair use requires the written permission of the copyright owners. Works not in the public domain cannot be commercially exploited without permission of the copyright owner. Responsibility for any use rests exclusively with the user. For more information contact the Institutional Repository Librarian at digitalcommons@usu.edu.

First Page

1

Last Page

24

Abstract

Accelerating inflation in the late 1970s and early 1980s led to renewed interest in empirical testing the causes of inflation. Although several possible causes of inflation have been suggested, all can be broadly divided into two major categories. The first is the keynesian or structuralist explanation asserting that inflation is directly caused by real shocks in some sectors of the economy. These exogenous shocks can be due to many factors, such as global crop failures, increases in prices of raw material, and other factors of this nature. The real shocks lead to a contraction in output which in turn increases prices. The price increases are subsequently accommodated by an expansion in the money supply. According to this explanation, the stock of money is en dogenously determined. Causality is always assumed to flow from changes in prices to changes in the money supply. Consequently, the price level is exogenously determined

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