IDEAS home Printed from https://ideas.repec.org/a/bla/ecorec/v54y1978i3p354-368.html
   My bibliography  Save this article

Devaluation, Capital Mobility, and Long‐Run Equilibrium

Author

Listed:
  • AKIRA TAKAYAMA
  • RICHARD K. ANDERSON

Abstract

The paper considers a small, fully employed economy with non‐tradeables, securities, and money. The paper first analyzes the effects of devaluation and financial controls in the short‐run equilibrium on the trade balance, the capital account, and the overall balance of payments. Disequilibria in the capital account and the overall balance of payments cause changes in the stock of securities and money, shifting the short‐run equilibrium. The paper investigates the condition for the‐ uniqueness and stability of the long‐run equilibrium under this adjustment process (‘specie flow mechanism’). Finally, the long‐run equilibrium effects of devaluation and monetary policies are examined.

Suggested Citation

  • Akira Takayama & Richard K. Anderson, 1978. "Devaluation, Capital Mobility, and Long‐Run Equilibrium," The Economic Record, The Economic Society of Australia, vol. 54(3), pages 354-368, December.
    • Handle: RePEc:bla:ecorec:v:54:y:1978:i:3:p:354-368
    DOI: 10.1111/j.1475-4932.1978.tb01637.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1475-4932.1978.tb01637.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1475-4932.1978.tb01637.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. G. C. Archibald & R. G. Lipsey, 1958. "Monetary and Value Theory: A Critique of Lange and Patinkin," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 26(1), pages 1-22.
    2. Turnovsky, Stephen J., 1976. "The dynamics of fiscal policy in an open economy," Journal of International Economics, Elsevier, vol. 6(2), pages 115-142, May.
    3. Akira Takayama, 1978. "The Wealth Effect, the Capital Account, and Alternative Policies Under Fixed Exchange Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(1), pages 117-147.
    4. Komiya, Ryutaro, 1969. "Economic Growth and the Balance of Payments: A Monetary Approach," Journal of Political Economy, University of Chicago Press, vol. 77(1), pages 35-48, Jan./Feb..
    5. Murray C. Kemp, 1970. "The Balance of Payments and the Terms of Trade in Relation to Financial Controls," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 37(1), pages 25-31.
    6. Frenkel, Jacob A & Rodriguez, Carlos Alfredo, 1975. "Portfolio Equilibrium and the Balance of Payments: A Monetary Approach," American Economic Review, American Economic Association, vol. 65(4), pages 674-688, September.
    7. F. H. Hahn, 1959. "The Balance of Payments in a Monetary Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 26(2), pages 110-125.
    8. Alexander K. Swoboda, 1972. "Equilibrium, Quasi-Equilibrium, and Macroeconomic Policy under Fixed Exchange Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(1), pages 162-171.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frenkel, Jacob A. & Mussa, Michael L., 1985. "Asset markets, exchange rates and the balance of payments," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 14, pages 679-747, Elsevier.
    2. Ghani E., 1984. "Effects of devaluation on employment and poverty in developing countries," ILO Working Papers 992349323402676, International Labour Organization.
    3. Kubendran, N., 2020. "Testing the Effectiveness of Johnsonian Approach using India’s Balance of Payments," Romanian Economic Business Review, Romanian-American University, vol. 15(3), pages 61-80, September.
    4. repec:ilo:ilowps:234932 is not listed on IDEAS
    5. Kim Kyung-Soo & Lee Jaewoo, 2001. "Asset Price And Current Account Dynamics," International Economic Journal, Taylor & Francis Journals, vol. 15(3), pages 85-108.
    6. Takashi Fukushima & Manoj Pant, 1982. "Economic Growth, Terms of Trade and Welfare in an Open Monetary Economy," The Economic Record, The Economic Society of Australia, vol. 58(2), pages 134-140, June.
    7. George Darko & Richard Dusansky & Pankaj Maskara & Nadeem Naqvi, 2006. "The gains from trade in a small monetary economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 403-430.
    8. Soriano, Ma. Cecilia G., 1990. "Classifying the Economy into Traded or Nontraded Sectors," Philippine Journal of Development JPD 1990 Vol. XVII No. 2-, Philippine Institute for Development Studies.
    9. Philip L. Brock, 2009. "Collateral Constraints and Macroeconomic Adjustment in an Open Economy," Working Papers UWEC-2009-03, University of Washington, Department of Economics.
    10. Agiomirgianakis, George M. & Zervoyianni, Athina, 2001. "Economic growth, international labour mobility, and unanticipated non-monetary shocks," Journal of Policy Modeling, Elsevier, vol. 23(1), pages 1-16, January.
    11. Waliullah & Mehmood Khan Kakar & Rehmatullah Kakar & Wakeel Khan, 2010. "The Determinants of Pakistan’s Trade Balance: An ARDL Cointegration Approach," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(1), pages 1-26, Jan-Jun.
    12. Ray C. Fair, 1979. "A Multicountry Econometric Model (Revised)," NBER Working Papers 0414, National Bureau of Economic Research, Inc.
    13. Carlos A. Rodríguez, 1980. "Interacción entre Flujos de Comercio y Tipo de Cambio Bajo Expectativas Racionales," CEMA Working Papers: Serie Documentos de Trabajo. 10, Universidad del CEMA.
    14. Lapan, Harvey & Enders, Walter, 1976. "Capital Mobility and Devaluation in a Monetary Approach to the Balance of Payments," ISU General Staff Papers 197601010800001033, Iowa State University, Department of Economics.
    15. Mr. James M. Boughton, 2002. "On the Origins of the Fleming-Mundell Model," IMF Working Papers 2002/107, International Monetary Fund.
    16. Habib Ahmed & C. Paul Hallwood & Stephen M. Miller, 2006. "The Exchange Rate-Investment Nexus and Exchange Rate Instability: Another Reason for 'Fear of Floating'," Working papers 2006-15, University of Connecticut, Department of Economics, revised Jan 2009.
    17. Hernán Rincón, 1999. "Testing the Short-Long-Run Exchange Rate Effects on Trade Balance: The Case of Colombia," Borradores de Economia 120, Banco de la Republica de Colombia.
    18. Lance Girton & Don E. Roper, 1976. "A monetary model of exchange market pressure applied to the post-war Canadian experience," International Finance Discussion Papers 92, Board of Governors of the Federal Reserve System (U.S.).
    19. Willem H. Buiter & Jonathan Eaton, 1982. "On the Adequacy or Inadequacy of Keynesian Balance-of-Payments Theory: A Rejoinder," NBER Working Papers 1032, National Bureau of Economic Research, Inc.
    20. Michael G. Porter, 1980. "Aspects of Monetary Theory and Policy," The Economic Record, The Economic Society of Australia, vol. 56(152), pages 1-16, March.
    21. Aizenman, Joshua, 1985. "Adjustment to monetary policy and devaluation under two-tier and fixed exchange rate regimes," Journal of Development Economics, Elsevier, vol. 18(1), pages 153-169.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecorec:v:54:y:1978:i:3:p:354-368. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/esausea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.