Document Type

Report

Publication Date

1976

Number

34

Abstract

Judging by recent issues of this, and other Journals, there is still a keen interest in determining the causes of, and cures for, Balance of Trade and Payments disequilibria. The emergence of the Portfolio Balance Approach—'' has led to viewing Balance of Trade deficits and surpluses as caused by discrepancies between desired and actual wealth holdings, and Balance of Payments deficits (surpluses) as caused by discrepancies between desired and actual money holdings. Thus, Balance of Trade and Payments deficits and surpluses are viewed as representing disequilibrium within the asset markets. Within this framework several authors have asked what self-correcting tendencies exist and whether a devaluation facilitates any tendency towards self-correction.