International Transmission of Inflation and Deflation

The concept of an international transmission mechanism, the process whereby economic disturbances are spread from one country to another, is an old one. Sophisticated discussions of such a mechanism appear in the work of David Hume (1752) in the eighteenth century and even earlier in that of the Spanish scholastic philosophers of the School of Salamanca in the sixteenth (see Grice-Hutchinson 1952). Under the 19th- and earlier 20th century gold standard, the question of international transmission arose repeatedly. In some instances, the spur was inflation; in others, most notably the Great Depression of the 1930s, it was deflation