The Problem of International Economic Equilibrium

The Problem of International Economic Equilibrium

The Problem of International Economic Equilibrium

The Problem of International Economic Equilibrium

Excerpt

The conditions under which international economic equilibrium will be achieved are a problem which has occupied economists at least since the time of David Hume. Some of the classical writers, and especially the most famous theorist among them, Ricardo, ascribed deficits in the balance of payments -- even if they were seemingly the result of events such as crop failures -- exclusively to a monetary cause, which Ricardo called a "relative redundancy of currency". Later generations of international trade theorists placed more emphasis than did Ricardo on the direct role of real causes. And the later development of the doctrine which, in the hands of authors such as YNTEMA (1932), OHLIN (1935) and MOSAX (1944), took the form of an extension from the closed to the open economy of general equilibrium analysis of the Walrasian type, gave more precise expression to the influence that other factors besides the purely monetary one exerted on the balance of payments. And since it is this modern general equilibrium approach which best allows us to systematize these factors, it will provide a good starting point for my discussion.

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