mand
fluctuations as a cause of fluctutations in output and employment. But the
simple fact is that the growth of nominal demand from 1970 to 1980 was enormous
in comparison with the growth of nominal demand in the previous two decades
in all industrial countries. Most of this increase in nominal demand went
into prices while growth of output declined dramatically and unemployment
became a major global problem for the first time after the Great Depression.
It must be the case that supply side factors have contributed to the decline
in output growth and to the emergence of worldwide unemployment.
The research work discussed in this paper does not suggest easy solutions
to the macroeconomic malaise of the industrial countries. It does suggest,
however, that restoration of growth at full employment requires policies that
support adjustments in the labour market, and the reallocation of resources
between contracting and expanding industries, and encourage saving and private
capital formation. Most importantly, the research also emphasizes the interdependence
between countries in an increasingly tightly integrated global
economy, and the importance of co—ordination of macroeconomic and trade
policies to reduce the costs of transition to lower inflation and the costs
of adjustments necessitated by the energy price increase and by changes in