‘External Balance’ and the Counter-Inflationary Imperative
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As quoted in §1.2.2, in its 1965 report, the Committee of Economic Enquiry used the relationship between full employment, price stability and external viability as an example of the potential for conflict between policy targets: ‘the nearer an economy is to full employment, the more difficult it is to achieve stability of costs and prices. On the other hand, stability of costs and prices makes for external viability, although action to achieve external viability, for example, by exchange devaluation, may operate against stable prices’ (Vernon et al., 1965, p. 46).
KeywordsCentral Bank Current Account Domestic Demand Cost Ratio Full Employment
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