Abstract
In the previous chapters we have examined the role of the exchange-rate variations (Chap. 12) and of income changes (Chap. 13) in the adjustment process of the balance of payments. An obvious step forward to be taken while remaining in the context of the traditional theory, is to attempt an integration between the two mechanisms in a broader framework in which the adjustment can come from both exchange rate and income simultaneously. In our opinion, the absorption approach suggested by Alexander (1952) also belongs to this framework, since after an initial debate in which it was presented as a new approach, alternative to the elasticity approach, the final synthesis suggested by Alexander himself (1959) can easily be fitted into this framework. Other attempts at integrating the two mechanism do of course exist and will be treated in Sect. 14.3.
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Gandolfo, G. (1986). The Absorption Approach and Interactions between Exchange Rate and Income in the Adjustment Process. In: International Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-07976-8_14
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