ABSTRACT
Weak and strong corporatist economies There is, in contrast, a second group of economies which, because of favorable institutional arrangements, could realize FE without accelerating rates of inflation if restrictive policies were not adopted by the first group of economies. These countries would likely adopt FE policies if expansionary policies were in force elsewhere, and did so in the pre-1974 period. Because they are not in force, this second group of economies is subject to an AD constraint. They too are now obliged to pursue restrictive AD policies, albeit for quite different reasons. Their AD policies are constrained by an inflationary bias ultimately due to depressed world economic conditions induced by the restrictive AD policies of the first group. Stimulative policies together with a depreciation of the currency generate unacceptable rates of inflation, not FE and external balance.
