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

Author/Editor:

J. J. Polak

Publication Date:

August 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2001/100

Subject:

Credit Demand for money Imports International trade Monetary base Money National accounts Personal income

English

Publication Date:

August 1, 2001

ISBN/ISSN:

9781451852400/1018-5941

Stock No:

WPIEA1002001

Pages:

26

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