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The Two Monetary Approaches to the Balance of Payments; Keynesian and Johnsonian


  • J. J. Polak


This paper emphasizes the distinction between two ‘monetary approaches to the balance of payments’, one developed in the IMF, the other under the leadership of Harry Johnson in Chicago. The IMF approach is presented as an evolutionary development of the Kahn/Keynes multiplier model in an open economy. Johnson’s approach is anti-Keynesian and self-proclaimed revolutionary. It posits the ‘essentially monetary character’ of the balance of payments. The IMF model tests satisfactorily as an explanation of income and imports over time. The long-run equilibrium approach of the Chicago model precludes statistical testing, and its short-run tests prove statistically meaningless.

Suggested Citation

  • J. J. Polak, 2001. "The Two Monetary Approaches to the Balance of Payments; Keynesian and Johnsonian," IMF Working Papers 01/100, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:01/100

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    Cited by:

    1. Gancho Todorov Ganchev, 2010. "The twin deficit hypothesis: the case of Bulgaria," Financial Theory and Practice, Institute of Public Finance, vol. 34(4), pages 357-377.
    2. Puchet Anyul, Martín, 2008. "Ejercicios de política económica y sistemas de cuentas de los sectores institucionales," Estudios Estadísticos 65, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Ben Clift & Jim Tomlinson, 2012. "When rules started to rule: the IMF, neo-liberal economic ideas and economic policy change in Britain," Review of International Political Economy, Taylor & Francis Journals, vol. 19(3), pages 477-500, August.
    4. Peijie Wang, 2009. "A Financial Approach to the Balance of Payments," Working Papers 2009-FIN-01, IESEG School of Management.
    5. Nicolas Ponty, 2005. "Un modèle MAcroDYNamique des économies des pays membres de l’UEMOA : MADYN," Documents de travail 118, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.


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