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An Unorthodox Genealogy on the Relation between the Markets for Currency Exchange and Credit in Steuart, Thornton, Tooke, and Keynes (1923)

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  • Ghislain Deleplace

    (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis)

Abstract

The paper first emphasises the aspects which Steuart (1767), Thornton (1802), Tooke (1844, 1838-1857), and Keynes (1923) have in common about the relation between the exchange rate and the short-term rate of interest: they all considered a temporary unfavourable foreign balance caused by an asymmetrical exogenous shock, which called for a discretionary policy favouring international short-term capital inflows to overcome the consequences of the deficit. These aspects draw an unorthodox genealogy on this issue between the four authors, contrary to the tradition originating in Hume and developed later by the British monetary orthodoxy. Secondly, the paper shows that there was an analytical progress from Steuart (1767) to Keynes (1923), which however faced a limit: if it reinforced an unorthodox genealogy, it did not integrate the modern idea according to which international short-term capital movements may themselves be a source of external disequilibrium. The origin of this limit was probably in the question raised, which was the adjustment to an exogenous asymmetrical shock.

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  • Ghislain Deleplace, 2020. "An Unorthodox Genealogy on the Relation between the Markets for Currency Exchange and Credit in Steuart, Thornton, Tooke, and Keynes (1923)," Post-Print hal-04253401, HAL.
    • Handle: RePEc:hal:journl:hal-04253401
    DOI: 10.1108/S0743-41542020000038C008
    Note: View the original document on HAL open archive server: https://hal.science/hal-04253401
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    References listed on IDEAS

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    1. Arnon,Arie, 2011. "Monetary Theory and Policy from Hume and Smith to Wicksell," Cambridge Books, Cambridge University Press, number 9780521191135.
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