Abstract
The multiplier analysis of the balance of payments (also called the foreign trade multiplier) has a twofold relevance. On the one hand, it can be seen as the counterpart, always in a partial equilibrium context, to the analysis based solely on exchange-rate variations, and thus as a step towards the integration of the two mechanisms. On the other hand, it has an importance of its own insofar as it is applicable to an institutional setting in which the exchange rate and prices are rigid. In this chapter all cases are examined: the small open-economy, the two-country case, and the n-country case.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
It goes without saying that the analysis is based on the usual assumption that the balance of payments of the various countries are expressed in terms of a common unit of measurement, so that the condition \(\mathop{\mathop{\sum }\limits_{i = 1}}\limits^{n}B_{i} = 0\) holds.
- 2.
- 3.
References
Deardoff, A. V., & Stern, R. M. (1979). What have we learned from linked econometric models? A comparison of fiscal-policy simulations. Banca Nazionale del Lavoro Quarterly Review, 32, 415–432.
Ferrara, L. (1984). Il moltiplicatore in mercato aperto nelle analisi dell’interdipendenza internazionale: teoria e evidenza empirica, unpublished thesis, University of Rome La Sapienza, Faculty of Economics.
Gandolfo, G. (2009). Economic dynamics (4th ed.). Berlin, Heidelberg, New York: Springer.
Gantmacher, F. R. (1959). Applications of the theory of matrices. New York: Interscience (also as Vol. Two of F. R. Gantmacher, 1959, The theory of matrices, New York: Chelsea). Pages refer to the Interscience edition.
Harrod, R. (1933). International economics. Cambridge (UK): Cambridge University Press.
Holzman, F. D., & Zellner, A. (1958). The foreign-trade and balanced budget multipliers. American Economic Review, 48, 73–91.
Johnson, H. G. (1956). The transfer problem and exchange stability. Journal of Political Economy, 44, 212–225; reprinted (with additions) In H. G. Johnson (1958). International trade and economic growth. London: Allen&Unwin; In R. E. Caves & H. G. Johnson (Eds.) (1968). Readings in international economics (pp. 148–171). London: Allen&Unwin; and In R. N. Cooper (Ed.) (1969). International finance - selected readings (pp. 62–86). Harmondsworth: Penguin.
Kennedy, C. & Thirwall, A. P. (1979). The input-output formulation of the foreign trade multiplier. Australian Economic Papers, 18, 173–180.
Kennedy, C. & Thirwall, A. P. (1980). The foreign trade multiplier revisited. In D. A. Currie & W. Peters (Eds.). Contemporary economic analysis (Vol. 2, pp. 79–100). London: Croom Helm.
Keynes, J. M. (1929). The German transfer problem. Economic Journal, 39, 1–7; reprinted In H. S. Ellis & L. A. Metzler (Eds.) (1949). Readings in the theory of international trade (pp. 161–169). Philadephia: Blakiston. And In The collected writings of J.M. Keynes (Vol. XI, pp. 451–459). London: Macmillan for the Royal Economic Society, 1983.
Machlup, F. (1943). International trade and the national income multiplier. Philadelphia: Blakiston; reprinted 1965 by Kelley, New York.
Meade, J. E. (1948). National income, national expenditure and the balance of payments, Part I. Economic Journal, 58, 483–505 (continued in 1949, Economic Journal, 59, 17–39).
Metzler, L. A. (1942). The transfer problem reconsidered. Journal of Political Economy, 50, 397–414; reprinted in: H. S. Ellis & L. A. Metzler (Eds.) (1949). Readings in the theory of international trade (pp. 179–187). Philadephia: Blakiston. In L. A. Metzler (1973). Collected papers. Cambridge (Mass.): Harvard University Press.
Metzler, L. A. (1950). A multiple region theory of income and trade. Econometrica, 18, 329–354.
Metzler, L. A. (1973). Imported raw materials, the transfer problem and the concept of income. In L. A. Metzler, Collected papers. Cambridge (Mass.): Harvard University Press.
Milana, C. (1984). Le importazioni di beni intermedi nel moltiplicatore del reddito di un’economia aperta. ISPE Working Papers, Roma, Istituto di Studi per la Programmazione Economica.
Miyazawa, K. (1960). Foreign trade Multiplier, input-output analysis and the consumption function. Quarterly Journal of Economics, 7 (4), 53–64; reprinted In K. Miyazawa (1976). Input-output analysis and the structure of income distribution (pp. 43–58). Berlin, Heidelberg: Springer-Verlag.
Ohlin, B. (1929). The reparation problem: A discussion. I. Transfer difficulties, real and imagined. Economic Journal, 39, 172–178; reprinted In H. S. Ellis & L. A. Metzler (Eds.) (1949). Readings in the theory of international trade (pp. 170–178). Philadephia: Blakiston.
Rotondi, Z. (1989). La trasmissione internazionale delle perturbazioni in cambi fissi e flessibili, unpublished thesis, University of Rome La Sapienza, Faculty of Economics.
Thirwall, A. P. (1980). Balance-of-payments theory and the United Kingdom experience. London: Macmillan.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Gandolfo, G. (2016). The Multiplier Approach. In: International Finance and Open-Economy Macroeconomics. Springer Texts in Business and Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-49862-0_8
Download citation
DOI: https://doi.org/10.1007/978-3-662-49862-0_8
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-662-49860-6
Online ISBN: 978-3-662-49862-0
eBook Packages: Economics and FinanceEconomics and Finance (R0)