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104 Int'l Lab. Rev. 489 (1971)
Surprise Inflation, Economic Growth and Employment

handle is hein.journals/intlr104 and id is 503 raw text is: Surprise Inflation,
Economic Growth
and Employment
Arthur BUTLER '
and Philip DELLA VALLE I
T HERE ARE AT LEAST four competing views on the effects of inflation 3
on economic growth and employment in less developed countries
(1) Deliberate inflation-promote inflation because it is good;
(2) Structuralist-accept inflation because it is necessary;
(3) Monetarist-avoid inflation because it is bad and unnecessary; and
(4) Surprise inflation-inflation is bad when expected but good when
not expected.
The first three views have been stated and restated often enough to
make it unnecessary for us to provide any more than very brief definitions
to suggest how they relate to our hypotheses. The concept of surprise
inflation evolves from Higgins's notion of an optimal pattern of inflation 4,
and is developed below.
Our main objective is to devise a definition of surprise inflation
which is capable of measurement and to determine whether there is a
systematic relation between surprise inflation and economic growth. We
then examine the mutual relation of inflation, growth and employment.
We focus our attention on Latin American countries since they have had
a great variety of inflationary experience and have been plagued by pools
Professor of Economics, State University of New York at Buffalo.
2 Assistant Professor of Economics, University of Windsor, Canada; on leave to the
Employment Planning and Promotion Department, ILO.
3 We define inflation simply and mechanically as the annual increase in the general level
of prices.
4 Benjamin Higgins: Economic development (New York, W. W. Norton and Co., 1968).

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