The Two Monetary Approaches to the Balance of Payments Keynesian and Johnsonian

26 Pages Posted: 15 Feb 2006

See all articles by Jacques Polak

Jacques Polak

International Monetary Fund (IMF)

Date Written: August 2001

Abstract

This paper emphasizes the distinction between two `monetary approaches to the balance of payments`, one developed in the IMF, the other under the leadership of Harry Johnson in Chicago. The IMF approach is presented as an evolutionary development of the Kahn/Keynes multiplier model in an open economy. Johnson`s approach is anti-Keynesian and self-proclaimed revolutionary. It posits the `essentially monetary character` of the balance of payments. The IMF model tests satisfactorily as an explanation of income and imports over time. The long-run equilibrium approach of the Chicago model precludes statistical testing, and its short-run tests prove statistically meaningless.

Keywords: Monetary approach to the balance of payments monetarism IMF

JEL Classification: B-22 B-31 C-51 E-12 E-51 F-40

Suggested Citation

Polak, Jacques, The Two Monetary Approaches to the Balance of Payments Keynesian and Johnsonian (August 2001). IMF Working Paper No. 01/100, Available at SSRN: https://ssrn.com/abstract=879663

Jacques Polak (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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