Understanding International Economics

This book examines the issues in international economics with special emphasis on international finance. The pure theory of international trade does not require any reference to money nor to the money prices of goods. It is assumed that trade takes place in the form of barter, or that money, if present, is a veil, with no influence on the real variables. Money serves only as a reference unit, the numeraire. The consequence is that the international accounts of any country vis-a-vis all the others must balance and no balance of payment problems exists.This book deals with the problems caused by balance-of payments disequilibria; the automatic adjustment mechanisms and the adjustment policies concerning the balance of payments; the relationship between the balance of payments and other macroeconomic variables; the various exchange-rate regimes; the problems of international liquidity and other complications of the international monetary systems.