The New Palgrave Dictionary of Economics

Living Edition
| Editors: Palgrave Macmillan

Absorption Approach to the Balance of Payments

  • David Vines
Living reference work entry

Latest version View entry history

DOI: https://doi.org/10.1057/978-1-349-95121-5_129-2

Abstract

The absorption approach to the balance of payments states that a country’s balance of trade will only improve if the country’s output of goods and services increases by more than its absorption, where the term ‘absorption’ means expenditure by domestic residents on goods and services. This approach was first put forward by Alexander (1952, 1959).

JEL Classifications

E0 
This is a preview of subscription content, log in to check access.

Bibliography

  1. Alexander, S.S. 1952. Effects of devaluation on a trade balance. International Monetary Fund Staff Papers 2: 263–278.CrossRefGoogle Scholar
  2. Alexander, S.S. 1959. A simplified synthesis of elasticities and absorption approaches. American Economic Review 49: 22–42.Google Scholar
  3. Ball, J., T. Burns, and J.S.E. Laury. 1977. The role of exchange rate change in balance of payments adjustment – The United Kingdom case. Economic Journal 87: 1–29.Google Scholar
  4. Caves, R.E., and H.G. Johnson, eds. 1968. Reading in international economics. London: George Allen & Unwin.Google Scholar
  5. Diaz Alexandro, C. 1966. Exchange rate devaluation in a semi-industrialized country: The experience of Argentina 1955–1961. Boston: MIT Press.Google Scholar
  6. Frenkel, J.A., and H.G. Johnson, eds. 1976. The monetary approach to the balance of payments. London: George Allen & Unwin.Google Scholar
  7. Harberger, A.C. 1950. Currency depreciation, income and the balance of trade. In Caves and Johnson (1968).Google Scholar
  8. Harrod, R.F. 1939. International economics, Cambridge economic handbooks, VIII. 2nd ed. London: Nisbet & Co..Google Scholar
  9. Kyle, J.F. 1976. The balance of payments in a monetary economy. Princeton: Princeton University Press.Google Scholar
  10. Laursen, S., and L. Metzler. 1950. Flexible exchange rates and the theory of employment. Review of Economics and Statistics 32: 281–299.CrossRefGoogle Scholar
  11. Machlup, F. 1943. International trade and the national income multiplier. Philadelphia: Blakiston Co.Google Scholar
  12. McCallum, J., and D. Vines. 1981. Cambridge and Chicago on the balance of payments. Economic Journal 91: 439–453.Google Scholar
  13. Meade, J.E. 1951. The balance of payments. London: Oxford University Press.Google Scholar
  14. Robinson, J.V. 1937. The foreign exchanges. In Essays in the theory of employment, ed. J. Robinson, 2nd ed, 1947. Reprinted in Reading in the theory of international trade, ed. H.S. Ellis and L.A. Metzler, 83–103. Philadelphia: Blakiston, 1949.Google Scholar
  15. Svensson, L., and A. Razin. 1983. The terms of trade and the current account: The Harberger-Laursen-Metzler effect. Journal of Political Economy 91: 97–125.CrossRefGoogle Scholar
  16. Swan, T.W. 1956. Longer run problems of the balance of payments. In The Australian economy, a volume of readings, ed. H. Arndt and W.M. Corden. Melbourne: Cheshire Press, 1963. Reprinted in Caves and Johnson (1968).Google Scholar

Copyright information

© The Author(s) 2008

Authors and Affiliations

  • David Vines
    • 1
  1. 1.