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"Estimated Output, Price, Interest Rate, and Exchange Rate Linkages Among Countries," Journal of Political Economy, June 1982, 507-535.
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Abstract

This article provides quantitative estimates from an econometric model of the output, price, interest rate, and exchange rate linkages among a number of countries. The linkages are examined by changing various policy variables and observing the resulting changes in the endogenous variables. The model is also used to estimate what is called the "exchange rate effect" on inflation. One of the ways in which monetary and fiscal policies may affect a country's inflation rate is by first influencing its exchange rate, which in turn influences import prices, which in turn influence domestic prices. The model allows this exchange rate effect on inflation to be estimated.
Comments

This paper uses the specification of the multicountry econometric model in 1981#1 and 1981#3 to examine various economic linkages among countries. Section V presents estimates of the exchange rate effect on inflation. The discussion in Chapter 9, Section 9.5, in 1984#2 (see also the notes on page 464) is taken from this paper.