Balance of Payments Theory

  • Graham Bird


The purpose of this chapter is to build on the model of the open economy constructed and refined in previous chapters. Contained in the model described there is the core of a general theory of the balance of payments or of the exchange rate.


Current Account Money Supply Rightward Shift Capital Account Domestic Output 
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Notes and References

  1. 1.
    Readers are again reminded that the treatment given to inflation in this book is extremely superficial and they are encouraged to look at other texts which focus more fully on this phenomenon. Similarly scant treatment is given to unemployment. Again, as unemployment has become more of a problem, there has been a growing number of texts produced which focus on it and one of these should be consulted in order to fill the gaps left here.Google Scholar
  2. 2.
    It needs to be recognised that a deficit on current account implies a net inflow of goods and services and, in the short run at least, this will tend to increase the domestic standard of living. The problem, of course, is to finance and sustain such an inflow.Google Scholar
  3. 3.
    Again, most introductory texts in macroeconomics contain analyses of monetary policy and open-market policy.Google Scholar

Copyright information

© Graham Bird 1987

Authors and Affiliations

  • Graham Bird
    • 1
  1. 1.University of SurreyUK

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