Homepage

International Economics, Robert A. Mundell, New York: Macmillan, 1968, pp. vii-xi.

Contents



Preface

Part I: The Theory of Exchange

Chapter 1. The Classical System 3

Analytical Procedure 5

The Method of Comparative Statics 6

The Free-Trade Model 8

Conditions of Stability 11

Price and Income Effects 15

Chapter 2. Transfers, Productivity, and Taxes 17

The Transfer Problem 17

Productivity Changes 22

Taxes and Subsidies on Trade 26

Commodity Taxes Other Mechanisms of Adjustment 38

Summary 41

Chapter 3. Generalization of the Classical Model 43

Productivity Changes 46

Tariff Changes 48

Consumption and Production Tax Changes 50

Unilateral Payments 50

Comparison of Two-Country and Multiple-Country Models 51

Chapter 4. Tariff Preferences and the Terms of Trade 54

A Geometric Model of Three Countries 54

The Basic Proposition 58

Zone of Mutual Improvement 59

Conclusions and Qualifications 60

Appendix: The N-Country Case 62

Chapter 5. A Geometry of Transport Costs in International Trade Theory 65

The Geometry 65

The F.O.B. and C.I.F. Terms of Trade 71

The Transfer Problem 73

The Optimum Tariff 80

Real Factor Returns 83

Concluding Remarks 84

Chapter 6. International Trade and Factor Mobility 85

Trade Impediments and Factor Movements 85

Effect of Relative Size 90

Factor Mobility Impediments and Trade 94

An Argument for Protection? 95

Concluding Remarks 99

Chapter 7. The Laws of Comparative Statics and Homogeneity 100

Relative Prices and Absolute Incomes 101

Two-Region and Multiple-Region Metzleric Models 102

Mathematical Analysis 103



Part II: Monetary Equilibrium and Adjustment Processes

Chapter 8. Barter Theory and the Monetary Mechanism of Adjustment 111

Income, Expenditure, and the Quantity of Money 114

The Anatomy of Disequilibrium and Dynamics 119

The Classical Case and Devaluation 121

Budgetary Policy 123

The Transfer Problem 125

Growth and Liquidity 126

Conclusions 129

Appendix: Three Monetary Standards 130

Chapter 9. Growth and the Balance of Payments 134

Money, Trade, and Growth 135

Allowance for Credit Creation 137

Defects of Traditional Theory 138

Chapter 10. The Balance of Payments 140

Definition 141

International Consistency 143

The Exchange Market 147

Analytical Approach 149

Chapter 11. The Monetary Dynamics of International Adjustment under Fixed and Flexible Exchange Rates 152

The Static System 153

The Dynamic Systems 157

The Importance of Capital Mobility 160

The Stock of Reserves 163

Speculation and Stability 166

The Principle of Effective Market Classification 169

Appendix 170

Chapter 12. A Theory of Optimum Currency Areas 177

Currency Areas and Common Currencies 178

National Currencies and Flexible Exchange Rates 179

Regional Currency Areas and Flexible Exchange Rates 180

A Practical Application 181

Upper Limits on the Number of Currencies and Currency Areas 182

Concluding Argument 184

Chapter 13. The Proper Division of the Burden of International Adjustment 187

The Internal Stability Criterion 187

The Relative Cost Criterion 188

Exchange-Rate Adjustment 190

The Relative Size Criterion 192

Normative Aspects of the Relative Size Criterion 194

Appendix: The Redundancy Problem and the World Price Level 195



Part III. Disequilibrium and Economic Policy

Chapter 14. The Nature of Policy Choices 201

Employment and the Balance of Payments 204

Mathematical Aspects of the Theory of Policy 207

Chapter 15. The International Disequilibrium System 217

Hume's Law and the Process of Adjustment 218

Monetary Policy and Sterilization Operations 222

Alternative Means to Equilibrium 228

Chapter 16. The Appropriate Use of Monetary and Fiscal Policy under Fixed Exchange Rates 233

The Conditions of Equilibrium 233

Two Systems of Policy Response 237

Principles of Policy 239

Chapter 17. Flexible Exchange Rates and Employment Policy 240

Stability Conditions of the Model 241

Fiscal Policy and Employment 243

Monetary Policy and Employment 245

Commercial Policy and Employment 246

Conclusions 247

Appendix 248

Chapter 18. Capital Mobility and Stabilization Policy under Fixed and Flexible Exchange Rates 250

Sectoral and Market Equilibrium Conditions 251

Policies under Flexible Exchange Rates 253

Policies under Fixed Exchange Rates 254

Other Policy Combinations 256

Diagrammatic Illustration 257

Conclusions 261

Appendix: The World Economy 262

Chapter 19. The Cost of Exchange Crises and the Problem of Sterling 272

Definition of Cost 272

The Short-Run Cost 272

Analogy to a Depreciating Exchange Rate 276

Saving the Cost 277

Adjustment Policies 280

Chapter 20. The Crisis Problem 282

Meaning of Crisis 282

Rules of the System 283

Operation of the System 284

Control Crisis 285

Reversal of Control 286

Conclusions 286

Appendix A: Alternative Dynamic Mechanisms 287

Appendix B: A Monetary Truce 288

Chapter 21. Hicksian Stability, Currency Markets, and the Pure Theory of Economic Policy 298

The Hicks Conditions and Sliding Parities 302

The Asymmetrical Position of the Standard Currency 304

Generalization of the Hicks Conditions 308

Currency Areas 310

General Conditions and Dynamic Stability 312

Hicksian Stability and the Theory of Economic Policy 313

Literature Cited 319

Index 325