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

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  • J. J. Polak

Abstract

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.

Suggested Citation

  • J. J. Polak, 2001. "The Two Monetary Approaches to the Balance of Payments: Keynesian and Johnsonian," IMF Working Papers 2001/100, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2001/100
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    Citations

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    Cited by:

    1. Henryk Gurgul & Lukasz Lach, 2012. "Two deficits and economic growth: case of CEE countries in transition," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 12, pages 79-108.
    2. Daniel Carvalho, 2019. "Financial integration and the Great Leveraging," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 54-79, January.
    3. Fadlallah, Abdellali & Chakhat, Zakaria, 2017. "Determination of the viability threshold of the external position in Morocco," MPRA Paper 83640, University Library of Munich, Germany, revised 13 Dec 2017.
    4. Goodhart, Charles A. E. & Needham, Duncan J., 2017. "Historical reasons for the focus on broad monetary aggregates in post-World War II Britain and the ‘Seven Years War’ with the IMF," Financial History Review, Cambridge University Press, vol. 24(3), pages 331-356, December.
    5. Puchet Anyul, Martín, 2008. "Ejercicios de política económica y sistemas de cuentas de los sectores institucionales," Estudios Estadísticos 4768, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. Peijie Wang, 2009. "A Financial Approach to the Balance of Payments," Working Papers 2009-FIN-01, IESEG School of Management.
    7. Nicolas Ponty, 2005. "Un modèle MAcroDYNamique des économies des pays membres de l’UEMOA : MADYN," Documents de travail 118, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
    8. Gancho Todorov Ganchev, 2010. "The twin deficit hypothesis: the case of Bulgaria," Financial Theory and Practice, Institute of Public Finance, vol. 34(4), pages 357-377.
    9. Gechert, Sebastian, 2012. "The multiplier principle, credit-money and time," MPRA Paper 34648, University Library of Munich, Germany.
    10. Goodhart, Charles A. E. & Needham, Duncan J., 2018. "Historical reasons for the focus on broad monetary aggregates in post-World War II Britain and the ‘Seven Years War’ with the IMF," LSE Research Online Documents on Economics 87364, London School of Economics and Political Science, LSE Library.
    11. Ben Clift & Jim Tomlinson, 2012. "When rules started to rule: the IMF, neo-liberal economic ideas and economic policy change in Britain," Review of International Political Economy, Taylor & Francis Journals, vol. 19(3), pages 477-500, August.
    12. Ella Kavanagh, 2018. "Evolving Central Bank thinking: the Irish Central Bank, 1943-69," Working Papers 18022, Economic History Society.

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