The Dollar and U.S. Inflation: Some Evidence from a Vecm Process

Ali F. Darrat, Marc C. Chopin, Ross N. Dickens

Research output: Contribution to journalArticlepeer-review

Abstract

Large fluctuations in the dollar value in recent years rekindled fears of increased U.S. price instability. With monthly data, we employ the cointegration and error-correction modeling technique to examine the nature of the interrelationship between the dollar and U.S. prices in a multivariate setting. The empirical results reveal strong and lasting effects of changes in the dollar exchange rate on U.S. inflation. The results also indicate that money supply exerts a potent and quick impact upon U.S. prices. Therefore, it seems that the Federal Reserve has shouldered much of the responsibility with respect to U.S. price stability in the face of the dramatic changes in the dollar value in recent years.

Original languageEnglish (US)
Pages (from-to)3-12
Number of pages10
JournalThe American economist
Volume45
Issue number2
DOIs
StatePublished - Oct 2001
Externally publishedYes

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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