¹ Examples of such studies are: Cobb, Roger W. and Elder, Charles, International Community: A Regional and Global Study (New York: 1970)Google Scholar; Puchala, Donald J., “International Transactions and Regional Integration,” International Organization 24 (Autumn 1970)CrossRefGoogle Scholar.

² Savage, R. and Deutsch, K., “A Statistical Model of the Gross Analysis of Transactions Flows,” Econometrica 28 (1960)CrossRefGoogle Scholar, posits a state of mutual equal proportions of transactions as an initial state. It would be equally plausible to regard autarky as an initial state. Indeed, in a homogeneously integrated situation, one might regard the Savage and Deutsch initial state as, more properly, an end state. There are no universally applicable end states in these works. This is the same point made by Haas, in “The Study of Regional Integration: Reflections on the Joy and Anguish of Pre-Theorizing,” International Organization 24 (Autumn 1970)CrossRefGoogle Scholar.

³ See for example, Puchala, “International Transactions,” and Rosecrance, Richard, Alexandroff, Alan, Koehler, Wallace, Kroll, John, Lacquer, Shlomit and Stocker, John, “Whither Interdependence?”, International Organization 31 (Summer 1977)CrossRefGoogle Scholar. (Hereafter cited as Rosecrance et al.)

⁴ Rosecrance et al., “Whither Interdependence?”

⁵ In their book Power and Interdependence (Boston: 1977) Keohane, Robert O. and Nye, Joseph S. describe interdependence in two waysGoogle Scholar. “Sensitivity” refers to the mutual responsiveness of one nation to events occurring in another. “Vulnerability” refers to the measure of a government's inability to insulate itself from effects of the transmission of events originating elsewhere. (This will be referred to hereafter as Keohane and Nye, Power and Interdependence.)

⁶ Ibid., pp. 428–29.

⁷ Cooper, Richard, The Economics of Interdependence: Economic Policy in the Atlantic Community (New York: 1968), chapter 1Google Scholar; and Keohane and Nye, Power and Interdependence, chapter 1. Transactions are part of what Salant refers to as the means of transmitting inflation internationally. (Salant, Walter S., “International Transmission of Inflation,” in Worldwide Inflation, Krause, Lawrence B. and Salant, Walter S., eds. (Washington, D.C.: 1977)Google Scholar.

⁸ Rosecrance, et al. , “Whither Interdependence?” p. 427Google Scholar. The term “interconnectedness” is from Inkeles, Alex, “The Emerging Social Structure of the World,” World Politics 27 (07 1975)CrossRefGoogle Scholar.

⁹ Rosecrance, et al. , “Whither Interdependence?” p. 428Google Scholar. The article also uses a convergence statistic measuring the degree of equalization over time in the international data, but I do not use that technique in this paper.

¹⁰ Only the wage price index is a factor price measure. Factor prices are paid by industry for the means of production: wages paid to labor, interest paid to capital, etc. The manufacturing index does not appear to measure prices at all. The consumer price index measures price level changes in outputs rather than inputs in the production process.

¹¹ The article does not state directly but implies that yearly data were used. For example, see pp. 432–34.

¹² Because correlation works with residuals, or error terms, the interdependence of these error terms from measurement to measurement is necessary to insure the validity of the procedure. Time series data are often contaminated by the dependence of the error in measuring data at any time on measurement errors made at previous time points. See Rao, Potlieri and Miller, Roger, Applied Econometrics (Belmont, Ca: 1971), pp. 121–26Google Scholar.

¹³ See for example Poulson, Barry and Wallace, Myles, “Regional Integration in the Middle East: The Evidence Portrayed in Capital Flows,” The Middle East Journal 33 (Autumn 1979)Google Scholar. Trade by oil exporting countries with outsiders tends to overwhelm the volume of intraregional transactions.

¹⁴ See for example, Walter S. Salant, “International Transmission of Inflation,” and Alexander Swoboda, “Monetary Approaches to Worldwide Inflation,” both in Krause and Salant, Worldwide Inflation.

¹⁵ I am indebted to Gordon Smith, Professor of Economics at Rice University, for his comments on the entire range of indices I considered for this analysis, and for his suggestion to log the values of the money supply.

¹⁶ Data is yearly for 1969–1972 and quarterly for 1973–1976. Source: International Monetary Fund, International Financial Statistics, various volumes. Revised figures were used when available. The abbreviations in the table refer to the following countries: AL = Algeria; BA = Bahrain; EG = Egypt; IQ = Iraq; JO = Jordan; KU = Kuwait; LE = Lebanon; LI = Libya; MA = Mauritania; MO = Morocco; QT = Qatar; SA = Saudi Arabia; SO = Somalia; SU = Sudan; SY = Syria; TU = Tunisia; UA = United Arab Emirates; YS = Arab Republic of Yemen, capital Sa'ana; YA = People's Democratic Republic of Yemen, capital Aden.

¹⁷ Anyone interested in obtaining a copy of these results may write to me at the Department of Political Science and Geography, Old Dominion University, Norfolk, Virginia 23508.

¹⁸ Salant, Walter S., “International Transmission of Inflation,” pp. 205–6Google Scholar.

¹⁹ Ibid., p. 206.

²⁰ Downward rigidity means that there is greater resistence associated with an indicator's movement downward than upward because of structural inhibitors in the economy. For example, wage rates move upward more easily than downward because of increasing minimum wage floors and because of the economic power of unions to resist contract provisions lowering wages.

²¹ These are discussed by Salant, Walter S., “International Transmission of Inflation,” pp. 206–10Google Scholar.