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Presents information related to several abstracts on economics published in the February 1962 issue of the journal 'Oxford Economic Papers.' Examination of India's third five year plan; Marginal rate of saving in the Indian economy; Indian balance of payments policy and exchange auctions.

The article discusses the abstracts of several papers on economics published in the November 1965 issue of the journal "International Monetary Fund Staff Papers." The first article of the journal is "International Liquidity and the Balance of Payments," by Oscar L. Altman. It opines that there are two major ways of creating international reserves of an unconditional character: serves of an unconditional character: through the mechanism of the gold exchange standard, using key currencies, principally dollars, through gold tranche positions in the International Monetary Fund. The second article is "Seasonality in World Financial and Trade Data," J.B. Gupta. The result of the article shows that, among the 13 series, Export have the highest seasonality; the seasonality of Imports, International Liquidity, Reserve Money, Foreign Assets, Claims on Government, and Money is also high. The third article of the journal is "Effects of Exchange-Rate Devaluations and Revaluations on Receipts from Tourism," by Andreas S. Gerakis, which argues that there are good a priori reasons for believing that shifts in relative prices could have powerful substitution effects on tourist receipts and that the latter could be price elastic.

This article presents abstracts of several papers about international monetary published in the March 1965 issue of the journal International Monetary Fund Staff Papers. In the article Euro-Dollars: Some Further Comments, Oscar L. Altman discussed some issues concerning the use of Euro-dollars in the U.S. While in the article Balance of Payments Adjustment Among Developed Countries, Anne Romanis argued that persistent disequlibria often originate in once-and-for-all changes and tend to abate in time, that the adjustment process can be strengthened by deliberate long-term policies and that if imbalances impose intolerable pressures on particular countries, recourse should be had to exchange rate adjustments at infrequent intervals.

The common theme running through the three papers prepared for this session is the nature and effectiveness of the international balance-of-payments adjustment process. Klein projects the effect of exchange-rate changes on national balance-of-payments positions. Kenen assumes fixed exchange rates and simulates the effects on the U.S. balance of payments of changes in U.S. monetary and fiscal policy. Adler and Stevens analyze the relationship between foreign direct investment by U.S. firms and U.S. exports, and then use their model to simulate the effect of several kinds of policy measures (exchange-rate, tariff and tax-rate changes) on that key aspect of the adjustment process. [ABSTRACT FROM AUTHOR]

The article discusses international capital movements during the postwar period in a context of broad trends in world payments. Data on balance of payments statistics was collected by the International Monetary Fund in addition to the data available by official grants and capital movements for this research. However, there is a lack of data on private capital and short term capital as it is not consistent from country to country and so contributes to some errors in research. Also, the quantitative statements provided are merely indications of orders of magnitude rather than specific estimates due to the lack of data.

Information about several papers discussed at the conference "Economic Development of European Socialist Countries," which was held in Plovdiv, Bulgaria on November 30 to December 6, 1964 is presented. The various reports presented focused on the comprehension of the economic trends and problems in Eastern Europe. Such features and issues considered including balance of payments, labor skills, and technological innovations.

This section introduces the articles which appeared in the March 1972 issue of the "Brookings Papers on Economic Activity." In the first article, William Branson estimates that the 1971 currency re-alignment, when fully effective, will bolster the United States merchandise trade balance by $7 billion to $8 billion a year. The effect of the devaluation of the U.S. dollar on the trade balance depends on how much it raises the dollar prices of U.S. imports, how much it lowers the prices of U.S. exports in terms of the currencies of buyers, and how responsive both buyers and sellers are to price changes -- that is, how large their price elasticities are. As Branson views the process, exporters set the price tags on tradeable goods in terms of their own currency. The paper by F. Thomas Juster and Paul Wachtel examines the effects of inflation and of transitory changes in income on consumer saving and spending behavior, with particular reference to the inflationary experience of recent years. The authors seek to explain consumer demand in several different ways, relying on both subjective data drawn from surveys of households and objective economic variables such as income, relative prices, and the rates of unemployment and of inflation. In the third article, Arthur Okun reaffirms analytically the desirability of an activist fiscal-monetary strategy. Like other Keynesian economists, Okun believes that fiscal and monetary policy should be shifted toward stimulus or restraint in light of observed and predicted economic fluctuations.

This article offers commentary on the paper "The Adjustment Process and the International Role of the Dollar" by Roy Blough, which analyzes the balance of payments linkage and the need to coordinate international monetary policies. The author points out that international imbalances can take the form of internal inflation or deflation, and changes in exchange rates can be used to adjust to disequilibria in international payments. The author supports Blough's claim that if nations can agree about border tax adjustments, international agreements can be reached concerning the adjustment mechanisms now available to international leaders.

This article presents comments from economists on the article by William Branson dealing with trade elasticity. Lawrence R. Klein: All economists may be divided into four groups: (1) trade elasticity optimists; (2) trade elasticity pessimists; (3) those who have no a priori opinion; and (4) those who don't care. William Branson is an optimist, and I am a pessimist. He takes his opinion on intuition, while I go strictly with the econometric evidence. He is in good company, however, joining an impressive array of students of trade theory who share his intuition and are quite willing to recommend trade policy on this basis. In addition to my concern over the lack of hard evidence on the magnitude- of trade elasticities, I question the methodology of the approach. The problems being studied cannot be answered in terms of trade relationships alone. Trade policies will have repercussions on the domestic economies of the trading nations, and these must be taken into account in a fully consistent way. Sir Alec Cairncross: I should like to comment from a British point of view on some of the issues raised by Branson's paper. Obviously, the size of elasticities is a relative matter, depending on the time period; They are smaller in the short run than in the long run. It therefore makes a big difference whether or not there is a great hurry to get the balance of payments into equilibrium. In the British case, we thought speed was at a premium; thus, we were very disappointed to see first a deterioration in 1968, and then a very slow improvement until well into 1969. Maybe, in the case of the American balance of payments, quick results may be less vital because not many good alternatives to holding dollars exist.

This article reveals the effect of the 1971 dollar devaluation on the trade balance of the United States. The year 1971 saw a major realignment of exchange rates among the world's important currencies. The basic cause of these changes was the continuing deterioration of the U.S. trade and payments position, and their proximate cause the massive speculation against the dollar throughout the year and suspension of convertibility by the United States in August. The changes in exchange rates against the dollar -- the dollar price of foreign currencies -- are expected to initiate a major swing toward surplus in the U.S. trade balance and consequently to reduce substantially the surpluses of some other countries. In the first two major sections of the paper the analytics of revaluation are discussed, flrst from the point of view of a single revaluing country, with attention to the difliculties concerning export supply elasticities and the "pass-through" issue; and then from the standpoint of multilateral trade, using a model originally developed by Paul Armington. The next three sections focus on quantitative estimates of the long-run effects of the realignment. The first reports an extension of the Armington model, under several assumptions about the relevant demand, substitution, and supply elasticities; it develops a figure of a bit less than $8 billion for the swing in the U.S. trade surplus from a 1971 base, and consistent estimates for the whole trade matrix. Next comes a brief discussion of the empirical model for U.S. bilateral trade developed by Stephen Magee, which provides estimates of the U.S. row and column of the world trade matrix.

This article analyzes developments in the 1970 balance of payments in the U.S. Lawrence Krause asked whether the trade balance was tracking its usual relationships to demand changes in the U.S. and abroad. This paper extends his question to (a) the basic balance, defined as the current account plus the net direct investment account and (b) the balance on private financial capital, that is, private capital flows other than direct investment. In 1970 the balance on merchandise trade was $2.2 billion, up from $0.6 billion in 1969. Exports rose from $36.5 billion in 1969 to $42.0 billion in 1970, an increase of $5.6 billion, or 15 percent. Adjusted for the 1969 dock strike, which shifted exports from late 1969 into early 1970, exports rose by 12 percent in 1970, compared with 13 percent in 1969. Imports rose from $35.8 billion in 1969 to $39.8 billion in 1970, an increase of $4.0 billion, or 11 percent. The usual definition of the basic balance includes, above the line, the balance on current account plus net flows of private long-term capital, both direct and portfolio investment. In the wake of the sharp decline of interest rates that began in 1970, there occurred a substantial outflow of private financial capital in 1970, which will probably continue, at a diminished rate, in 1971.

The article presents a discussion related to business cycle written by Milton Gilbert and a reference to the paper written on the same topic by Jacques J. Polak and Rudolf R. Rhomberg. Europe has had only two recessions since the war, one in 1952 and one in 1958, contrasted with the four that the U.S. has had. The 1952 recession was due mainly to restraints exercised by the policy-making authorities for the purpose of correcting balance-of-payments difficulties, although the reaction from the Korean boom was also a factor, it was secondary. The 1958 recession was also due to policy restraints exerted during the three years from 1955 to 1957. These restraints were applied mostly to correct excess demand, overfull employment, and inflationary pressures, although balance-of-payments difficulties were a factor in some or most cases. Thus the only recessions resulted from policy measures, taken deliberately. The recessions also were ended by policy management. Restraints were relaxed when the authorities considered that expansion could be safely resumed. And it did resume.

This article presents a discussion on a research paper "Commercial Policy in the Underdeveloped Countries," published in the May 1959 issue of the journal "American Economic Review," by Raul Prebisch from the United Nations Economic Commission for Latin America. In dealing with mechanisms that are supposedly "inherent" in elasticities or terms of trade, one cannot help feeling uneasy about the degree of generalization and the inference from historical statistics that the material of the research paper permits. General methods of determining elasticities, especially over the long term, are far less than perfect, and the difficulties of terms-of-trade analysis are also great enough to warrant caution. The numerical examples used by Prebisch are based on the usual assumption of an income elasticity of less than unity for primary products. On the demand side this assumption seems reasonable enough, but long-term supply elasticities within the industrial countries have been shifting significantly in developing countries. However, the domestic output of certain minerals has not kept up with demand, so that the import requirements are rising relative to income growth in the industrial world, notwithstanding some protectionist interference.

The article presents a critical discussion of the papers by Seymour E. Harris and John V. Van Sickle on interregional competition and economic adjustments. According to the author Harris has developed his topic in a most interesting and stimulating fashion. He is to be complimented for this able presentation of the difficulties facing the Northeast in its attempt to maintain its competitive position in the U.S. Harris appears at the outset to favor the regional adjustment process of classical economics. After a brief description of this process, he contends that the expected adjustments do not take place or do so only after costly delays. Some policies of government such as banking policy and government relief and spending policies hamper adjustments, other policies that are classified as favoritism toward developing regions add to the burden of adjustment in the older regions. Harris' paper represents an important addition to interregional economic analysis, with particular reference to an area in which much investigation already has been undertaken.

The balance of payments in an open economy plays an important role in determining changes in the stock of domestic money. International reserve inflows, for example, will increase the domestic stock of money if they are added directly to the money balances of residents, or if they are exchanged for domestic currency at the central bank. In Australia, reserve flows are an important factor, and occasionally a dominant one, in determining changes in the domestic stock of money. This observation raises the question, what are the major determinants of Australian reserve flows and what role, if any, do policy actions play in affecting reserve flows? In this paper the latter, and simpler, approach is taken. Reserve flows are related to factors determining growth in demand for money, and to policy and other domestically determined factors that contribute to growth in the stock of money. This money-market approach to the balance of payments is a slightly modified version of a model developed by H. G. Johnson (1972). [ABSTRACT FROM AUTHOR]

This paper is directed toward two issues. The first involves several competing explanations for the U.S. position in international capital market relationships. One of these explanations involves the concept of international financial intermediation; the usefulness of this analogy to domestic intermediation is questioned. The second involves the implications of each of these explanations for capital market relationships for the impact of U.S. capital outflows on the U.S. payments balance. [ABSTRACT FROM AUTHOR]

The article reports on methods for the revaluation of gold as a solution for the inadequacy of the international monetary reserves of the U.S. There is strain on the gold reserves of the U.S. while the foreign held short term dollar claims have increased and caused the U.S. to examine the balance of payments implications in relation to monetary and fiscal policies. It is suggested that revaluing gold can meet long run increases in the demand for international liquidity, and a gradual proposal is developed in this paper.

The article presents a reply of G. E. Makinen, an economist, to the article published in the July 1972 issue of the journal, "Journal of Business," related to his papers on Balance of Payments Payback Periods. Contrary to claims, his paper did not advocate a piecemeal approach to the balance of payments problem centering on discriminatory control of capital outflow. It was an industry or micro approach and fraught with many measurement problems which he took great pains to point out to the reader and stated the direction of bias of his results. Relative to the financial-mix substitution question, his choice of no available foreign financing was based on the observed investment patterns of the automotive industry. He asserts that in computing his recoupment periods, assumptions were fairly close to the observed facts. They were not intended to present what might happen in an ever-changing world and, at best, had short-run relevance. His results would undergo modest modification if allowance were made for financial mix and associated imports. He do not believe his recoupment periods to be severely understated.

The purpose of this paper is to present a classification of all logically possible accounting phenomena that is neat, tight, rigorously symmetrical, and equally applicable to a private enterprise, an endowed institution, a governmental unit, or any other accounting entity. The classes established are few and broad, as they must be to be universally relevant. A full analysis of the economic affairs of any particular accounting entity would, of course, require subclasses that are important for that kind of entity. Many of the categories in this classification scheme embody concepts whose boundaries are different from those usually employed in accounting discussions. This creates a problem in terminology. In some cases the problem has been met by use of terms with heretofore no very definite connotations in accounting, but in others the paper has adopted the common accounting term that most closely approximates the concept it best wishes to describe. In the latter cases these terms are used, once they have been introduced, to convey the special meanings given them here rather than their usual meanings. The classification itself is quite neutral so far as the really difficult problems of accounting theory are concerned. It implies no particular formula for the determination of income or the valuation of assets. It simply provides a framework for arraying the accounting events and decisions that do occur or might occur.

It is patently obvious that periodic balance-of-payments crises will remain an integral feature of the international economic system as long as fixed exchange rates and rigid wage and price levels prevent the terms of trade from fulfilling a natural role in the adjustment process. It is, however, far easier to pose the problem and to criticize alternatives than it is to offer constructive and feasible suggestions for the elimination of what has become an international disequilibrium system. The present paper, unfortunately, illustrates that proposition by cautioning against the practicability, in certain cases, of the most plausible alternative: a system of national currencies connected by flexible exchange rates. A system of flexible exchange rates is usually presented as a device whereby depreciation can take the place of unemployment when the external balance is in deficit and appreciation can replace inflation when it is in surplus. The idea can be used to illustrate certain functions of currencies, which have been inadequately treated in the economic literature and which are sometimes neglected in the consideration of problems of economic policy.

The article presents authors' comments on three research papers on international trade and balance of payment by the U.S. by economists Hal B. Lary, J. Herbert Furth and Edward M. Bernstein. Lary has succeeded in putting many diverse elements of the U.S. balance of payments into a comprehensive and yet manageable form. In his analysis of the U.S. trade account, Lary says that the main influences that are perhaps amenable to economic analysis are income effects and price effects. Another interesting suggestion of Lary is that a faster rate of growth would make a positive contribution to the U.S. balance of payments. In another paper Furth suggests that payments deficit needs amendment if it is to be applicable to a reserve currency country like the U.S. He says that if the net cash decline involves a gold loss rather than an increase of foreigners' dollar balances, it may need more rapid correction than would otherwise be necessary. The paper by Bernstein says that the adequacy of reserves in the particular case of the U.S. cannot be tested in any simple or usual way. Two criteria have to be used relating to the state of the balance of payments and to the holdings of dollars by foreign countries.

This paper presents some revisions to estimates made initially by Wilson and more recently revised by Butlin of the balance of payments and capital imports for the period of the First World War and five subsequent years. The acceptance of the existing residual estimate of net private capital inflow for the post First World War period 1919-20 to 1923-24, based on the Wilson-Butlin balance of payments statistics, would immediately raise a paradox, for it suggests that negligible foreign investment took place in Australia during a boom period of rapid industrial development and at a time when British and American investors were once again looking for profitable investment opportunities. This paradox can be resolved only if it is realized that the impression of negligible private capital inflow in the post-war period is a statistical illusion due to the failure of the previously available estimates to take into account the fact that payments for Australia's major exported commodities were made a number of years prior to their ultimate shipment overseas. The revised estimates suggest that private foreign investment in Australia during the nineteen twenties is more important than has previously been thought—the new estimate of its magnitude being fifty percent higher than the previous estimate. Sections II and III respectively place wool and wheat exports for the period, on a "payments basis" rather than the existing "shipments basis". Payments for many millions of pounds worth of these two commodities were made a number of years prior to actual shipment. Export data in the Overseas Trade Bulletins are based on the time of shipment rather than the time of payments for exports. For most purposes, including analysis of the balance of payments, capital imports, the banking system and the level of economic activity within Australia, the actual value at the time of payment rather than the "declared value" of an export commodity at the time of shipment is the... [ABSTRACT FROM AUTHOR]

SUMMARY This paper deals with several issues related to the impact of import substitution on a country's demand for imports. With the help of a simple model, it points out that once a given rate of growth has been reached and is maintained through time, the fact that investment expenditures have a high import component will not give rise to balance of payments difficulties, as the direct impact of this year's investment on the demand for imports should be more than offset by last year's investment in the import substituting industry now coming to fruition. The pressures on the balance of payments will arise during the transition period when a country is attempting to step up capital formation in the import substituting sector. The paper also emphasizes the need to take into account all direct and indirect repercussions of an increase in investment on the demand for imports when estimating the foreign exchange savings to be realized from a given investment project. The second part of the paper considers the likely effects of a change in the relative prices of imports on the manufacturing sector producing goods previously imported, but which still relies on imported raw materials and intermediate products, and on the demand for imports. Several reasons are given for a presumption against a high price elasticity in the demand for imports, based on the derived nature of a large component of such demand. Given these structural conditions the alternatives open to a policy maker in a semi-industrialized country facing the need to cut back imports are likely to be quite grim. [ABSTRACT FROM AUTHOR]

SUMMARY This paper attempts to develop rigorous, if somewhat less than fully operational, definitions of the twin concepts of individual nation and world international liquidity. These definitions make the international liquidity of an individual country (Zi, in the case of country i) a probability-weighted sum of its foreign assets, liabilities, lines of credit and prior commitments, and world liquidity (L) the sum of the various Li. It is argued that the state of a nation's balance of payments at any time may fruitfully be expressed in terms of the rate of change of its international liquidity so defined. Inasmuch as such a formulation removes the restriction that balance of payments surpluses and deficits of all nations net to zero, it supplies the ancient words 'favorable' and 'unfavorable' with new significance. Finally, the paper considers several classes of current schemes to increase world liquidity. The definitions prove helpful in indicating just what conditions must obtain if reformers' hopes are not to be frustrated. [ABSTRACT FROM AUTHOR]

The section comments on an article published in August 1967 issue of the Quarterly Journal of Economics about fiscal and monetary policies under alternative exchange rate systems. The verbal description of the basic model employed in the cited paper stated correctly that the value of foreign exchange reserves forms part of the base of the money supply while the balance of autonomous foreign payments on current and capital account equals its rate of change. Under the stated assumptions, including perfect price rigidity at less than full employment, the correct model for the case of constant exchange rates based on equations, assuming that units are defined in such a way that the value of the rate equals unity. The money supply is assumed to be proportional to central bank liabilities and in turn, equal the sum of central bank claims on domestic residents and foreign exchange reserves and their rate of change. The application of monetary policy induces an equivalent change of exchange reserves in the opposite direction and the long-run equilibrium value of the money supply will remain unchanged. Changes of the money supply will then, of only feasible for the short run. A more realistic model would also have to take account of the nature of internationally mobile funds as a stock. For a constant interest differential to the rest of the world, capital flows would presumably approach zero over time.

Most of the discussion of exchange rate policies centers around the currencies of the United States, Great Britain, France, and other relatively highly developed economies. This is unfortunate. In the more highly developed economies the comparatively high degree of monetary stability which has existed in recent years has pushed into the background some of the fundamental economic relationships among monetary and fiscal policies, exchange rate policies, balance of payments problems, and trade restrictions. It may be that these relationships will show up in better focus in the economic laboratories provided by some of the less developed countries. In the latter countries inflation is likely to be the order of the day, Also, there is likely to be much less concern in any one of these countries over the impact of its alternative international exchange policies on the rest of the world. This paper is a survey of the experiences of the Republic of Chile in these areas from the 1920's through 1962. It attempts to piece together the relationships among exchange rate policies, the balance of payments, and trade restrictions as they became evident over time. More attention is focused on the 1959-62 period than on the pre-1959 period, because of time and space limitations and because more data are available for the former. We look first at the economic and political background against which the survey is set. The basic theoretical framework of the survey is presented next. Third, the pre-1959 experience is considered. Fourth, the 1959-62 period is examined. [ABSTRACT FROM AUTHOR]