Format of Original
College of Business Administration, University of Nebraska, Lincoln
Quarterly Journal of Business and Economics
Original Item ID
Shelves: H B1 .N Mem Periodicals
The hypothesis that rapid defense buildups contribute to inflation recently has been rejected by Donald F. Vitaliano. In this paper, it is argued that this result is misleading, given that it is obtained under the implausible assumption of constancy of the expected real rate of interest. The hypothesis is reexamined using a well-known measure of the expected inflation rate, and it is found that growth of defense spending has a statistically significant positive effect on the rate of price inflation.