The Monetary Approach to the Balance of Payments

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The Balance of Payments as a Monetary Phenomenon

Empirical Evidence, Spain 1955-71

MANUEL GUITIAN¹

1   INTRODUCTION

This chapter provides an empirical study of the Spanish economy during the period 1955–71. Major emphasis is placed on the economy’s external developments in an attempt to test the theoretical proposition that the balance of payments is a monetary phenomenon. This proposition derives from what Johnson and Mundell have called a new approach to the theory of the balance of payments and of the adjustment process.²

The empirical analysis will investigate the relationship between the balance of payments and the rate of domestic credit expansion. Further, an attempt will be made to ascertain the importance of the latter relative to ...