ABSTRACT
In this chapter we consider what light can be thrown on the question of why some countries are able to respond more flexibly than others to various shocks. This is done by considering the responses to the oil-price shocks of the 1970s and 1980s. We begin with a brief account of the oil-price shocks, followed by an equally brief discussion of what we mean by flexibility, what factors might affect flexibility, and whether it is possible to give some empirical content to the notion of flexibility. In particular (in Part II) we shall attempt to develop an index of the degree of flexibility of different countries.
