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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