Fluctuations of the Italian Balance of Payments, 1951–73: An Econometric Analysis

Abstract

In this chapter empirical evidence which supports a monetary explanation of Italian balance-of-payments fluctuations from 1951 to 1973 is presented. The theoretical model underlying the tests is based on the monetary approach to the balance of payments as developed under the small-country assumption by Mundell (1971), Johnson (1958, 1973), and a number of their students.¹ Its main assumptions and implications, and its close similarities with the Italian tradition of balance-of-payments and exchange-rate theory, have already been outlined in detail in Chapter 1, and discussion of the derivation of the equations tested will therefore be very short.