Target Compatibility and International Co-operation
The aggregate theory of international payments adjustment allows for the possibility that nations will deliberately strive to have nonzero basic balances. The concept of a payments goal that is either positive or negative can derive from the desire of a nation to finance a deficit considered temporary or to avoid adjustment in the face of a surplus that will not last. Another reason for having a non-zero payments target is that national authorities are deliberately using the international sector to help in the achievement of domestic, macroeconomic goals (see Chapter 4, pp. 64–8). The short-run theory requires that nations be prepared to adjust their balance-of-payments policies to meet many different kinds of disturbance — real or monetary and shift, trend or reversing — of varying magnitudes at irregular intervals. National authorities will be always trying to reconcile any differences between forecast and target international balances.
KeywordsCurrent Account Trading Partner Competitive Ratio Capital Account International Target
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