Monetary Accommodation of Supply Shocks under Rational Expectations.

The article focuses on an examination of monetary accommodation of supply shocks under rational expectations. It states that in the short run there is an exploitable inflation-employment trade-off where unanticipated shocks from the Organization of Petroleum Exporting Countries (OPEC) are concerned, while conclusions depend more on model specifics where anticipated OPEC shocks are concerned. It mentions that if the U.S. alters its money supply as a response to an increased nominal price in oil, price levels in other countries as measured by their own currencies would not be unaffected by the money supply of the U.S., but that the exchange value of the dollar would depreciate or appreciate depending on if the money stock in the U.S. fell or rose.