A Theory of Balance-of-Payments Adjustment for the Hegemon

H. Peter Gray
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H. Peter Gray: Rutgers - the State University

Chapter 3 in The Exhaustion of the Dollar, 2004, pp 52-72 from Palgrave Macmillan

Abstract: Abstract The absorption theory (Alexander, 1952) (Johnson, 1958) is the basic theoretical analysis of the elimination of a balance-of-payments deficit. However, this theory is not, in its original form, directly applicable to the subject matter of this book. In its original form, the theory applied to a world of ostensibly fixed rates of exchange in which, with the exception of the key-currency country, which had, at that time, a very large positive INW, international capital movements were both screened by the authorities in the exporting country and were small relative to the volume of current transactions. Second, the theory applied to a relatively small nation so that it is in need of a major restatement when it is to be applied to a large country (the key-currency nation).

Keywords: Foreign Direct Investment; Current Account; Aggregate Demand; Capital Flow; Portfolio Investment (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-50020-4_3

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DOI: 10.1057/9780230500204_3

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