Balance of Payments Adjustment: Macro Facets of International Finance Revisited

275 Pages·2000·1.5 MB·English

by  Augustine C. Arize

Balance of Payments
Adjustment: Macro Facets
of International
Finance Revisited
Augustine C. Arize, et al.
Editors
GREENWOOD PRESS
Balance of Payments
Adjustment
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Balance of Payments
Adjustment
Macro Facets of International
Finance Revisited
EDITED BY
Augustine C. Arize
Theologos Homer Bonitsis
Ioannis N. Kallianiotis
Krishna M. Kasibhatla
John Malindretos
Contributions in Economics and
Economic History, Number 203
GREENWOOD PRESS
Westport, Connecticut • London
LibraryofCongressCataloging-in-PublicationData
Balanceofpaymentsadjustment:macrofacetsofinternational
financerevisited/editedbyAugustineC.Arize...[etal.].
p. cm.—(Contributionsineconomicsandeconomichistory,
ISSN0084–9235;no.203)
Includesbibliographicalreferencesandindex.
ISBN0–313–30826–8(alk.paper)
1.Balanceofpayments. 2.Keynesianeconomics. 3. Chicago
schoolofeconomics. I.Arize,AugustineC. II.Series.
HG3882.K49 2000
382'.17—dc21 98–15330
BritishLibraryCataloguinginPublicationDataisavailable.
Copyright(cid:1)2000byAugustineC.Arize,TheologosHomerBonitsis,
IoannisN.Kallianiotis,KrishnaM.Kasibhatla,andJohnMalindretos
Allrightsreserved.Noportionofthisbookmaybe
reproduced,byanyprocessortechnique,withoutthe
expresswrittenconsentofthepublisher.
LibraryofCongressCatalogCardNumber:98–15330
ISBN:0–313–30826–8
ISSN:0084–9235
Firstpublishedin2000
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10 9 8 7 6 5 4 3 2 1
Contents
Tables and Figures ix
Introduction xi
I. A Theoretical Review of the Keynesian and Monetary
Approaches to the Balance of Payments 1
1. Full Employment, Balance of Payments and Adjustments in
Unified (Fixed) Exchange Rate Regimes 3
Dilip K. Ghosh and Gilles Duteil
2. A Survey of the Monetary Approach to International
Finance 15
Demetri Tsanacas, Krishna M. Kasibhatla and
John Malindretos
II. An Empirical Review of the Keynesian and Monetary
Theories to the Balance of Payments 33
3. Empirical Evidence for the Traditional Approach to the
Capital Account 35
Valerie Englander, Melvin Johnson and John Malindretos
4. The Traditional Theory to the Current Account: An Empirical
Examination 39
Augustine C. Arize, Elias C. Grivoyannis,
Ioannis N. Kallianiotis and Stanley J. Lawson
vi Contents
5. Empirical Evidence for the Monetary Approach to Balance of
Payments Adjustments 55
Augustine C. Arize, Elias C. Grivoyannis,
Ioannis N. Kallianiotis and John Malindretos
III. Criticisms of the Keynesian and Monetary Views of
Balance of Payments Determination 81
6. A Critique of the Traditional Approach to International
Finance 83
Theologos Homer Bonitsis and John Malindretos
7. The Monetary Theory of the Balance of Payments: A
Retrospective Analysis 98
H. Peter Gray
IV. A Theoretical Comparison of the Keynesian and
Monetary Theories to the Balance of Payments 111
8. Keynesian and Monetary Approaches to the Balance of
Payments 113
Melvin Johnson, Krishna M. Kasibhatla and
John Malindretos
V. Empirical Comparisons of the Keynesian and Monetary
Theories of Balance of Payments Determination 123
9. International Adjustment for Kenya: The Relevance of the
Traditional and Monetary Approaches 125
Luis Eduardo Rivera-Solis, Krishna M. Kasibhatla and
John Malindretos
10. A Comparison of the Monetary and Traditional Approaches
to International Competitiveness 135
Krishna M. Kasibhatla, John Malindretos and
Paul R. Kutasovic
11. The Keynesian and Monetary Approaches to International
Accounts Adjustment: Some Heuristics for Germany 140
Theologos Homer Bonitsis and John Malindretos
12. The Role of Exogeneity, Causality and Exchange-Rate
Volatility in the Modeling of U.S. Export-Demand Function:
Some New Evidence 153
Augustine C. Arize
Contents vii
VI. A Review of the Theoretical Literature on Exchange
Rate Determination 169
13. The Traditional Approach to Balance of Payments Adjustment
under Flexible Exchange Rates 171
Augustine C. Arize, Elias C. Grivoyannis,
Ioannis N. Kallianiotis and Valerie Englander
14. Doctrinal Views on Exchange Rate Determination: An
Eclectic Approach 200
Dilip K. Ghosh, Abraham Mulugetta and Asrat Tessema
VII. Empirical Evidence on Exchange Rate Determination 213
15. Recent Evidence on the Determinants of Foreign Exchange
Rates 215
Demetrios Giannaros
16. A Re-examination of the Monetary Approach to the Exchange
Rate: A Long-Run Approach 222
Bill Francis, Iftekhar Hasan and James R. Lothian
Conclusion 233
Selected Bibliography 235
Index 249
About the Editors and Contributors 255

Tables and Figures
TABLES
1.1 Specie Flow Price Mechanism 5
5.1 Demand for Money in Mexico, 1955–1974 65
5.2 Demand for Money in Mexico, 1955–1974 66
5.3 Foreign Reserve Flow Equations for Mexico, 1955–1974 67
5.4 International Reserve Flows, Domestic Prices and Interest
Rates 69
5.5 International Reserve Flows, U.S. Prices and Domestic Interest
Rates 70
5.6 International Reserve Flows, U.S. Prices and Interest Rates 71
5.7 The Monetarist Model for the Balance of Payments (∆R) 76
t
7.1 Cumulative Current Balances, 1982–1995 104
7.2 U.S. International Net Worth 106
7.3 Outstanding Financial Assets of Non-Americans in U.S.
Financial Markets 107
9.1 Almon Polynomial Distributed Lag Model: Degree Two and
Six Quarterly Lags 130
9.2 Almon Polynomial Distributed Lag Model: Degree Two and
Six Quarterly Lags 132
11.1 Balance of Trade Model 148
11.2 Balance of Payments Model 149