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Devaluation, Capital Mobility, and Long‐Run Equilibrium

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  • AKIRA TAKAYAMA
  • RICHARD K. ANDERSON

Abstract

The paper considers a small, fully employed economy with non‐tradeables, securities, and money. The paper first analyzes the effects of devaluation and financial controls in the short‐run equilibrium on the trade balance, the capital account, and the overall balance of payments. Disequilibria in the capital account and the overall balance of payments cause changes in the stock of securities and money, shifting the short‐run equilibrium. The paper investigates the condition for the‐ uniqueness and stability of the long‐run equilibrium under this adjustment process (‘specie flow mechanism’). Finally, the long‐run equilibrium effects of devaluation and monetary policies are examined.

Suggested Citation

  • Akira Takayama & Richard K. Anderson, 1978. "Devaluation, Capital Mobility, and Long‐Run Equilibrium," The Economic Record, The Economic Society of Australia, vol. 54(3), pages 354-368, December.
    • Handle: RePEc:bla:ecorec:v:54:y:1978:i:3:p:354-368
    DOI: 10.1111/j.1475-4932.1978.tb01637.x
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    References listed on IDEAS

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