Inflation, Fluctuations, and Growth in a Dynamic Input-Output Model

Abstract

Inflation has been among the major economic problems of the post-war years. On both theoretical and policy levels, in academic and governmental circles alike, there has been mounting concern over the persistent upward thrust of prices. The result has been a considerable body of economic literature dealing with inflation. Although the contributions represent many diverse views, they share a common approach to the problem. Inflation has generally been studied within the context of an aggregative economic model, frequently with little or no attention given to interindustrial relationships. There is, however, at least one notable exception contained in a recent study by R. M. Goodwin.' Within the framework of a dynamic Leontief system, Goodwin considered a generalized costpush theory represented by a fixed markup-pricing policy in each industry. His approach led to a system of first-order difference equations which could be either stable or unstable, the result depending chiefly upon the percentage markups and upon the relationship between marginal cost and price in each industry.2 But even if his price subsystem is stable in the sense that each price approaches some upper limit, there is still no guarantee that a complete model would depict a viable