Introduction

Abstract

The purpose of this volume is to examine critically the literature dealing with balance of payments adjustments theories. As Krueger [43] has recently pointed out, there is no theory of international monetary economics. Economists have been unable to construct a simple general theory which can be refined and applied to a wide variety of problems. Instead we have a number of approaches to the theory of international adjustment. For example some models place great emphasis on the role that relative price changes may play whereas others concentrate on changes in output, inventories and/or employment that may arise when prices remain constant. Some models place great emphasis on the role that ‘monetary’ variables, such as the money supply or international capital flows, may play in the adjustment process, whilst other models concentrate on ‘real’ variables such as production, consumption and relative prices. To trace the developments that have occurred over the past twenty-five years, the reader may wish to consult the interesting surveys by Metzler [56], Haberler [22], Corden [12] and Krueger [43].