International Economics, Robert A. Mundell, New York: Macmillan, 1968, pp. viixi.
Contents

Chapter 1. The Classical System 3
Analytical Procedure 5
The Method of Comparative Statics 6
The FreeTrade 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 TwoCountry and MultipleCountry 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 NCountry 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
TwoRegion and MultipleRegion Metzleric Models 102
Mathematical Analysis 103
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
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
ExchangeRate 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
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 ShortRun 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
Index 325