The ‘specie-flow mechanism’ is an analytic version of automatic, or market, adjustment of the balance of international payments. In competitive markets with specie-standard institutions, behaviour will lead to national price levels and income flows consistent with equilibrium in the international accounts, commonly interpreted in this context to mean zero trade balances.
KeywordsBalance of payments Cantillon, R. Comparative advantage Gervaise, I. Hume, D. Law of one price Malynes, G. de Marshall–Lerner condition Mercantilism Monetary approach to the balance of payments Price level Price-specie-flow mechanism Quantity theory of money Specie-flow mechanism
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