Price Behavior in the Light of Balance of Payments Theories

88 Pages Posted: 25 Jun 2004 Last revised: 2 Jul 2010

See all articles by Irving B. Kravis

Irving B. Kravis

University of Pennsylvania - (Deceased)

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Date Written: June 1977

Abstract

The purpose of this paper is to describe the behavior of that subset of prices and price indexes that is relevant to the theory of balance of payments adjustment. The theoretical writings on the balance of payments may be viewed at this juncture as falling into two main groups -- the "standard" theories and the more recent monetary theories. Each of these is examined to determine the assumptions and predictions made about particular kinds of prices, and the empirical evidence regarding these prices is then set out. Although some assessment of the theories -- solely from the price aspect -- is offered, the emphasis is on the price structure and price behavior that ought to be captured in a satisfactory theory of the mechanisms of international adjustment. For pragmatic reasons, attention is placed mainly on the theory relating to exchange rate changes rather than on the explanation of adjustment with fixed exchange rates.

Suggested Citation

Kravis, Irving B. and Lipsey, Robert E., Price Behavior in the Light of Balance of Payments Theories (June 1977). NBER Working Paper No. w0181. Available at SSRN: https://ssrn.com/abstract=260370

Irving B. Kravis

University of Pennsylvania - (Deceased)

N/A

Robert E. Lipsey (Contact Author)

National Bureau of Economic Research (NBER) at New York (Deceased)

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