The Relation of the Domestic Economy to Balance-of-Payments Equilibrium

Abstract

This paper represents an attempt to reconcile the separate objectives of balance-of-payments equilibrium and full-employment domestic demand. By considering first the classical theory of adjustment and next the Keynesian contributions, I will try to lay a theoretical foundation for the policy considerations in the second half of the paper. Particular emphasis is given there to the economies of the United States and Great Britain. Except for the policy implications contained in the first, theoretical half of this paper, the particular case of development growth will not be examined.