Devaluation, Wealth Effects, and Relative PricesThe American Economic Review
Publication VersionPublished Version
AbstractThe emergence of the portfolio balance approach 1 has led to a reformulation of the causes of balance-of-trade and payments disequilibria. According to this approach, balance-of-trade deficits and surpluses reflect discrepancies between desired and actual wealth holdings; while balance-of payments deficits and surpluses reflect discrepancies between desired and actual money holdings. Thus, balance-of-trade and payments disequilibria are viewed as representing disequilibria within the asset markets. Using this framework several authors2 have examined the self-correcting nature of disequilibria within the balance of-payments accounts and the ability of a devaluation to reduce the magnitude of a disequilibrium.
Copyright OwnerAmerican Economic Association
Citation InformationHarvey Lapan and Walter Enders. "Devaluation, Wealth Effects, and Relative Prices" The American Economic Review Vol. 68 Iss. 4 (1978) p. 601 - 613
Available at: http://works.bepress.com/harvey-lapan/46/