Impact of energy prices and money growth on five industrial countries

Journal Article · Sun Mar 01 04:00:00 EST 1981 · Fed. Reserve Bank St. Louis Rev.; (United States)

OSTI ID:6531498

Hafer, R W

Recent actions taken by OPEC have increased sharply the relative price of energy in the five industrial countries examined in this article. Monetary growth followed a generally restrictive pattern in 1979 to 80, similar to that in 1973 to 74. As a consequence of both OPEC actions and reduced money growth, the economies of Canada, Germany, Japan, the United Kingdom and the United States have been burdened with declines in real gross national product (GNP) and rising rates of inflation during the past two years. In Canada, the United Kingdom and the United States, unemployment rates have remained abnormally high or have increased in recent years. Periods of declining economic activity and rising prices create problems in selecting the appropriate monetary policy response. A sharp, prolonged decrease in money growth intended to inhibit upward pressure on prices due to rising energy prices will aggravate the decline in real economic activity. On the other hand, an increase in money growth intended to offset the decline in real GNP will contribute to even greater future inflation. One recent study indicates that, with no change in money growth, rising energy prices will affect the rate of inflation only temporarily. Moreover, increasing the rate of growth of money only temporarily reduces the increased unemployment that accompanies the slowdown. This suggests that stable money growth may well be the correct response to such supply shocks. 13 references, 1 table.

• OSTI ID: 6531498
• Journal Information: Fed. Reserve Bank St. Louis Rev.; (United States), Journal Name: Fed. Reserve Bank St. Louis Rev.; (United States) Vol. 63:3; ISSN FRBRD
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
ASIA
CANADA
DEVELOPED COUNTRIES
ECONOMIC GROWTH
ECONOMIC IMPACT
ENERGY EXPENSES
EUROPE
FEDERAL REPUBLIC OF GERMANY
GROSS NATIONAL PRODUCT
INFLATION
JAPAN
NORTH AMERICA
UNITED KINGDOM
USA
WESTERN EUROPE