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Balance of Payments Adjustment within a Common Market

  • Peter Coffey
  • John R. Presley

Abstract

Balance of payments equilibrium has the same connotations for members of a common market as for non-members. At least during the next decade balance of payments equilibrium in the Common Market will be determined at the national level, rather than at the Community level. Individual countries should prevent a continuing recurrence of overall deficit or surplus on the balance of payments. This contrasts with the Community approach where equilibrium exists if the sum total of overall deficits of member countries is exactly balanced by the sum total of overall surpluses. The latter approach does not require the same degree of discipline from the individual member country. In seeking an overall balance of payments equilibrium it is not essential for the member country to maintain a bilateral payments balance with any other member of the Community or to maintain a payments balance with the rest of the Community taken together. Overall equilibrium is achieved when the external surplus earned by a member country is just sufficient to meet an internal deficit with other members of the Community, or when an internal surplus is sufficient to counteract an external deficit. This kind of equilibrium existed within the Benelux Union in that the external surplus of the Netherlands was sufficient to meet its internal deficit with Belgium and Luxembourg.

Keywords

Monetary Policy Fiscal Policy Capital Mobility Capital Account Current Account Balance 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Peter Coffey and John R. Presley 1971

Authors and Affiliations

  • Peter Coffey
  • John R. Presley

There are no affiliations available

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