The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

International Finance

  • Maurice Obstfeld
Reference work entry


Fundamental to international finance is the idea of ‘external balance’, whereby a country’s external indebtedness does not threaten its ability to meet its international obligations. The requirements of external balance have varied with the nature of the linkages among economies across historical episodes. This article both reviews the major developments in the economic analysis of external balance and traces how nations have sought to achieve it from the era of the gold standard in 19th century through the Bretton Woods system to the era of floating exchange rates that began in 1973.


Balance of payments Balanced trade Bank of England Barter trade theory Beggar-thy-neighbour Bretton Woods system Central banks Consumption smoothing Current account Default Dornbusch, R. External balance Fiscal policy Fisher, I. Fixed exchange rates Floating exchange rates Friedman, M. Gold standard Gold-exchange standard Great Depression Hume, D. Income–specie–flow mechanism Inflation Inflationary expectations Interest rates Internal balance International capital flows International finance International financial adjustment International Monetary Fund International reserves Intertemporal maximization hypothesis Investment Keynes, J. M. Liquidity preference Lucas, R. Meade, J. Mercantilism Money supply Moral hazard Mundell, R. Nash–Cournot equilibrium National income identity Nurkse, R. Obstfeld, M. Ohlin, B. Pigou, A. Price stability Price–specie–flow mechanism Protectionism Public debt Quantity theory of money Real-balance effect Ricardo, D. Samuelson, P. Seigniorage Sovereign debt Sterilization Sticky prices Sticky wages Terms of trade Third World debt Transfer problem Triffin, R. Unemployment Viner, J. Walras’s law Willingness-to-pay hypothesis 

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Recent general perspectives on international finance may be found in International Monetary Fund, new open economy macroeconomics and World Bank, as well as entries on various specific aspects of international economics.


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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Maurice Obstfeld
    • 1
  1. 1.