A Stylized Model of the Devaluation-Inflation Spiral (Modle stylis de la spirale dvauationinflation) (Un modelo estilizado de la espiral devaluacin-inflacin)

Author(s): Carlos A. Rodriguez

Source: Staff Papers - International Monetary Fund, Vol. 25, No. 1 (Mar., 1978), pp. 76-89
Published by: Palgrave Macmillan Journals on behalf of the International Monetary Fund
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A StylizedModel of the
Devaluation-Inflation
Spiral
CARLOS A. RODRIGUEZ *

oftheresulting
balanceofpayEVALUATIONS,orthemonetization

mentssurpluses,arefrequently
mentioned
as contributing
factors
to an inflationary
process.Aside fromthe directinitialinflationary
effectowingto therisein thepricesof tradedgoods(and therepercussionon thepricesofnontraded
usuallycongoods),a devaluation
tributesto a (transitory)
balanceof paymentssurplus,1 the monetizationofwhich,itmaybe claimed,further
contributes
tothesustenance
or acceleration
oftheinflationary
process.
It isthuspossibletounderstand
thereluctance
todevalueincountries
that,havingachieveda stabledomesticpricelevel,face a persistent
balance of paymentsdeficit.Alternative
correctivemeasuresrange
fromreducing
thedegreeofmonetization
toobtaining
ofthefiscaldeficit
externalloans thatmay help to postponethe requiredinflationary
adjustment.
to thepermanent,
Ratherthanresorting
butpolitically
costly,fiscal
have chosenthewayofperiodicdevaluacorrection,
manycountries
ofeach beingmarkedbythatpointat whichdomestic
tions,thetiming
reservesare "dangerously
pricesare "welloutofline"orinternational
low." The outcomeof sucha processis a devaluation-inflation
spiral
withno clearrelation
ofcausality,although
theexternalsectoris often
blamedfortheinflationary
outcome.
In thispaper,theauthorhas constructed
a simplemodelin which
toanalyzesomeofthebasicelements
ofthedevaluation-inflation
spiral.
In thecontextof themodeldevelopedhere,themainfuelbehindthe
ofthefiscaldeficit
and devaluation,
and the
spiralis themonetization

*Mr. Rodriguez,associate professorat Columbia University,was on leave as a visiting

scholar in the Asian Departmentof the Fund when this paper was prepared. He is a
graduateof the Universityof Chicago.
'The transitoryeffectof a devaluationon the balance of paymentsis emphasized in
the recentliteratureon the monetaryapproach to the balance of payments; see, for
example, Dornbusch(1973) and Frenkeland Rodriguez(1975).

76

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STYLIZED

MODEL OF DEVALUATION-INFLATION

SPIRAL

77

is theonlyalternative
subsequentinflation
open giventhefiscalconstraint.In theabsenceofa steadyflowofforeign
aid thatmatchesthe
fiscaldeficit,
themodelgeneratesa devaluation-inflation
cycle,devaluationtakingplace at thatpointwhereinternational
reservesreacha
minimum
acceptablelevel even thoughthe pricelevel maythenbe
stable.Withthepossibility
of thedevaluationtakingplace whenthe
ofblaming
the
stabilized,thereis thetemptation
pricelevelhas finally
on thedevaluation,
inflation
and attention
resulting
maybe diverted
whichis thefiscal
awayfromthemorebasicunderlying
disequilibrium,
deficit.
SectionI of thispaperdescribesthe basic structure
of the model
in theab(a variantof Salter's(1959)traded-nontraded
model)
goods
sence of a fiscaldeficit;SectionII incorporates
thefiscaldeficitand
describesthe devaluation-inflation
spiral;SectionIII bringsa brief
discussionof flexibleexchangerates; and SectionIV presentsthe
conclusions.

I. Basic Structureof Model in Absenceof Fiscal Deficit

The economythatis describedhereis smallenoughininternational
marketsthatall pricesof tradedgoods are fixedin termsof foreign
exchange.Thus,all tradedgoodsare groupedintoa singlecomposite
ratesare denotedbyQT and CT;
good whoseoutputand consumption
thepriceof thetradedgood in termsofforeign
exchangeis assumed
to equal one. The domesticpriceof thetradedgood is thenequal to
theexchangerate,E (unitsof domesticcurrency
per unitof foreign
exchange).The economyalso producesand consumesa nontraded
"homegood" whoseoutputandconsumption
ratesareQHandCH and
itsprice,PH. Givenfullemployment
of thefixedfactorendowments,
the supply of QH and QT depends on the relativeprice between both
E
goods, - e, the real exchange rate,
PH

QT = QT (e)

QH = QH (e)

(1)

and supplyresponsesare assumedto be normal,thatis,

OQT

Oe

QH
Oe

(1')

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The author has abstained fromthe dynamic considerationsof investmentand capital accumulation and has assumed that domestic
money,M, is the only store of value available to domesticresidents.
Demand fortradedand home goods depends on the nominalprices
the author
of both goods and the nominalmoney stock; furthermore,
has assumed away "money illusion," so that demands must be homogeneousof degreezero in all nominalquantities.Choosingthenominal price of the home good as the deflatorfornominalvariables, demands are given by
CT=

CT (e,

m)

CH = CH (e, m)

(2)

where
m=

M
PH

CH and CT are assumed to change withe and m accordingto

OCH
de >0,
CT

Oe

OCH
m >0
Am
>CT0

Om

(2')

The stock of internationalreserves held by the central bank is R,

and its rateofchange (in theabsence of capital flows)equals theexcess
supplyof tradedgoods (the balance of trade paymentssurplus):

dR =
dt

= QT (e) - CT (e, m)

(3)

It follows fromthe signs assumed in equations (1') and (2') that a

highere improvesthe tradebalance, since it increases QT and reduces
CT, while a higherm deterioratesthe trade balance, since as consumptionincreases, the exportsurplusis reduced.
Marketequilibriumforhomegoods is assumed to prevailat all times;
this is achieved throughmovementsin the domesticnominalprice of
home goods, PH, which, given the fixedM and E at any time, imply
opposite movementsin e and m:
QH (e) = CH (e,

m)

(4)

As shown in Figure 1, a higherstock of real cash balances--mincreases CH and requires a higherrelativeprice of home goods-a
lower e-to clear the market. Thus, for the marketequilibriumfor

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STYLIZED

MODEL OF DEVALUATION-INFLATION

79

SPIRAL

e
CHfe,mo)
CH e,m1>mo)
/

eO
el

_ __

__ _ _

_ _
I

QH(e)

QH,CH
FIGURE I

homegoods,e and m are inversely

related.Denotethereducedform
m
between
and
e
that
thehomegoodsmarket
so
clearsby
relationship
m = H (e),

H' (e)<

(5)

Since equation(5) mustprevailat all times,we can substitute

it in
to
obtain
the
in
a
of
equation(3)
change reservesonlyas function the
realexchangerate:
R = f(e)-QT(e)

where

OQT

ae

- CT[e,H(e)]

(6)

OCr OCT
Oe Om

The authorhas assumedthatthereis some value of e such thatthe

excess supplyoftradedgoodsis zero, thatis, R is notchanging.
Denotinge as thatvalueoftherealexchangerate,e mustsatisfy
R =f(e) = 0
Associatedwithe, thereis a level of real cash balances,rm,that
marketequilibrium
forhomegoods:
guarantees
m = H (e)

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If the onlysourceof moneycreationis reservepurchasesby the

centralbank,itis clearthatmh
ande arethelong-run
values
equilibrium
fore andm,sincewhene equalse, thenominalmoneysupplyremains
andthusthereis noreasonforeither
PH, e, orm tochange.
unchanged,
A moredetailedanalysisof thedynamicadjustment
of theeconomy
follows.
In theabsenceofdomesticcreditcreation,
thenominalmoneystock
increasesby the value of foreign
exchangepurchasesby thecentral
bank:
M = E R, or, using equation (6),

= f (e)

Thus,-

(7)

orlessthanzeroas thebalanceofpayments
willbe greater

is in surplusor deficit.
Figure2 describesthedynamicbehavioroftheeconomy.Thedownof m and e for
wardslopingscheduleHH shows the combinations
as in equation(4) or
whichthehomegoods marketis in equilibrium,
theonlylevelofe forwhich
(5). The verticallineat e = e represents
M=

= 0.

At any instant,the nominalmoneystockis a predetermined

variable, as is, of course,thenominalexchangerate;thus,theratioMIE
toequais fixedatanytime,although
timeitchangesaccording
through
tion (7). Since MIE

-, it followsthatat any instantthe ratiom/eis

e

a predetermined
variable.In Figure2, theline0 E0 showsthepreEo

vailingmleratioat timeto,giventhenominalmoneystockM(to)and
is thenattainedat
the(fixed)exchangerateE0o.Short-run
equilibrium
theintersection
of the0

?) linewiththeHH schedule,at pointa.

Eo

belowa wouldimplyan excess

Eo
a lowerPH,increasing
supplyofhomegoodsthatis corrected
through
bothm and e and thusmovingtheequilibrium
pointtowarda. Corto theinitialratioM(to)aretheshort-run
values
equilibrium
responding
Anypointon thefeasiblelocus0

Eo

m(to)and e(to).Sincee(to)is shownto be less thane, thebalanceof

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STYLIZED

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MODEL OF DEVALUATION-INFLATION

81

M(to)
Eo

mfto) -

---

^^

~~0 ~

e(to)

^HH

FIGURE 2

paymentsis in deficit,so thatR and M are falling.As M falls,the

M(t) linerotatesclockwise,andthustheshort-run
equilibrium
position
Eo

movessoutheastalongHH untile is reached,at whichpointexternal

balanceis attained,so thatthemoneysupplyremainsunchanged
and
themotionoftheM(t) linestopsas thesystemreachesitssteadystate
Eo

withexternalbalancean(l pricestability.
equilibrium
oftheadjustment
and moreintuitive
An alternative
proexplanation
withan initialstockofcash balancessuch
cess is as follows.Starting
thatthe balanceof paymentsis in deficit,the subsequentfallin M
owingto reservelosses decreasesthedemandforhomegoods,thus
a lowernominalpriceof homegoods to clearthatmarket.
requiring
in thebalanceof
The fallin bothPH andM worktowarda reduction
of tradedgoodsis decreasedwhile
deficit,as consumption
payments
remainsin
increases.As longas thebalanceof payments
production

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M andPH keepfalling
timeandthebalanceofpayments
deficit,
through
M and PH fallto a levellow enoughto
eventually,
keepsimproving;
at whichpointM, andthusPH,
equilibrium,
yieldbalanceofpayments
achieved.
tendsto remainstableas externalbalanceis finally

II. Structureof Model withFiscal Deficitand

Descriptionof Devaluation-Inflation
Spiral
to purchasea fixed
is committed
Assumenowthatthegovernment
amount,
go,oftradedgoodsperunitoftime,and thatthosepurchases
thatthegovernment
arefinanced
centralbankcredit(assuming
through
purchasesofhomegoodswouldnotchangeanyofthebasicconclusions
of the model).Thereare now two sourcesof monetary
expansion:
D. The nominalmoney
reserves,R, and creditto the government,
supplychangesaccordingto
M = ER + D
(8)
Dividingequation(8) byE
M

*D
-R/ +--

(9)

NoticethatDIE is therateof government

spendingon tradedgoods
(DIE = go), so thatequation (9) becomes
ME=R + go

(10)

We mustnowaccountforthefactthattherateofchangein reserves
equals the privatesector's excess supplyof tradedgoods-equation(6)-minus therateofgovernment
purchasesoftradedgoods(go),
so that
R

(11)

=f(e)-gO

fromwhich,it followsthatforR to equal zero,a real exchangerate

higherthane is requiredin orderto inducea positiveexcess supply
demand.
oftradedgoodsbytheprivatesectorto matchthegovernment
=
=
Let e denote thatlevel of e forwhichR f (e)
go 0; necessarily,
e mustbe largerthane (e being such thatf (e) = 0).
equation(11)inequation(10),we obtainthefinalexpresSubstituting
sionforthechangein thenominalmoneystock:

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STYLIZED

MODEL OF DEVALUATION-INFLATION

83

SPIRAL

-f(e)

(12)

Thus, for M/E to equal zero, e must equal e. Therefore,the level of

the real exchange ratethatis consistentwitha stable moneystock(and
thus,price stability)is smallerthanthe one requiredforexternalbalance, e: price stabilitycan be achieved only at the expense of a continuous balance of paymentsdeficit.Figure 3 describes the dynamic
behavior of the economy, given a positive level of deficit-financed
governmentspendingon tradedgoods.

M=0

R=O
M(to)
Eo

Mfto)
E1
. HH

FIGURE 3

Beforetheintroduction
ofthedeficit-financed
spending,theeconomy
for
at
at
whichbothR and M
was its steady state equilibrium pointa,
were zero. With the introductionof a positive rate of government
spending,go, the R = 0 line shiftsto the rightup to e = e, such that
f (e) - go = 0. Neitherthe marketequilibriumscheduleforhomegoods
nor the 3M = 0 schedule is affectedby the new rate of government
spending.At the instantof the change, nothinghappens withe and m,
as all of the governmentdeficitis financedwithreservelosses. (Since

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e = e is now less thane, the balance of paymentsis in deficit.)Thus,

ofgovernment
on tradedgoodsdoesnothave
theintroduction
spending
an instantaneous
inflationary
impacton thepricesofhomegoods,as
reserve
all theexcess demandfortradedgoodsis equilibrated
through
losses.
Assumenow thatin theinitialsituation
international
reserveswere
at a level(Ra) thatwas judgedto be an acceptablelong-run
average.
Assumealso thatthereis a minimum
acceptablereservelevel(Rm)at
whichthecentralbankhas to takecorrective
action.Assumingthat
the fiscaldeficitcannotbe removedand thata permanent
inflowof
aid cannotbe obtained,theonlycorrective
actionleftto the
foreign
bankis devaluation.
itis notsensibleto assumethatthe
Furthermore,
devaluationwillbe aimedat yieldingpreciselyexternalbalance,because in thatcase reserveswouldbe stabilizedonlyfora moment:
sincethemoneysupplykeepsincreasing
on accountofdomesticcredit
wouldturnintodeficit
creation,thebalanceofpayments
immediately
afterward
andthusreserveswouldfallagainbelowRm.The authorhas
thusassumedthatthecentralbankwoulddevaluesufficiently
to generatea periodof balanceofpaymentssurplusesthatwouldbringthe
stockofreservesbackto theaverageacceptablelevel,Ra.
Goingback to Figure3, aftertheincreaseing, thesystemremains
at pointa whilereservesare running
motionless
down;whenRa-Rm
nominal
ofreservesis lost,a devaluation
takesplace. Attheprevailing
the
the
devaluation
is to
for
home
immediate
effect
of
price
goods,
increasethepriceoftradedgoods,andthusresourcesareshifted
away
of homegoods intothatof tradedgoods,while
fromtheproduction
thedemandforhomegoodsis increased;thereis thusa potential
excess
a higher
demandinthehomegoodsmarket
thatis clearedthrough
PH.
The increasein thenominalpriceof homegoods must,however,be
smallerthantherisein thenominalexchangerate,so thattheimpact
effectof thedevaluationis to increasethelevelof therealexchange
rate.To see this,assumethatin responseto theriseinE, thepriceof
homegoods wereto increasein thesameproportion,
suchthate remainedunchanged;
fromanyrealcash balanceseffect,
both
abstaining
supplyofanddemandforhomegoodswouldthenremainat theirsame
levels (since e would thenbe the same). Real cash
predevaluation
balances,however,mustbe lower,sincePHhas risenandthusCH must
havefallen,eventhough
e is unchanged;
theremustthenbe an excess
supplyofhomegoodscallingfora lowerPH. It followsthat,afterthe
thantheincrease
devaluation,
PHmustrisebutin a smallerproportion
in E.

on thepricesofhomegoods,thehigher
Followingtheimpacteffect

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MODEL OF DEVALUATION-INFLATION

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85

real exchangerateinducedby thedevaluationis assumedto turnthe

balanceofpayments
intosurplus.The previously
stablemoneysupply
thefiscal
nowstartsrisingon accountofbothcreditcreationtofinance
of the reserveinflow.As M increases
deficitand the monetization
a
time,thedemandforhomegoodsalso increases,requiring
through
risingnominalpriceofhomegoodsto clearthemarket.The risingPH,
inturn,impliesa falling
realexchangerate,andthustheinitialresource
shifttowardthetradedsectoris slowlyreversed.Eventually,
thereductionintherealexchangerateandtheaccumulation
ofcashbalances
is enoughto eliminate
theexcesssupplyoftradedgoods,andreserves
as externalbalanceis achieved.The nominalmoney
stop increasing
supply,however,is stillrisingowingto thedomesticcreditcreation
to financethe fiscaldeficit.Thus, the nominalpriceof homegoods
continues
andas therealexchangeratestillfalls,thebalance
increasing,
of payments
turnsintodeficit.For a while,thecontractionary
effects
on themoneysupplyofthereservelosses are notenoughto offset
the
effects
to
domestic
credit
so
that
the
creation,
owing
expansionary
moneysupplykeepsrising.However,as M andPH go on increasing,
thebalanceofpayments
itreaches
deficit
growslargeruntileventually
a levelforwhichthevalue of reservelosses preciselyequals thatof
domesticcreditcreation,and themoneysupplystopsrising.WithM
forthepriceofhomegoodsor thereal
stabilized,thereis no tendency
andfalling
exchangeratetochange,andthusa periodofpricestability
reservesis reached.
In termsof Figure3, theimpacteffectofthedevaluation
is to shift
the- linefrom
to
and therealexchange
instantaneously,
E
Eo
El
rateis increasedfrome to e1, whichhas to be largerthane in order
forthebalanceofpayments
to be in surplus.The impacteffect
ofthe
devaluation
is toreducerealcashbalances,andthisis achievedthrough
a jumpin thepriceof homegoods; notice,however,thatsincee has
increaseinPH mustbe less thanthatofthe
increased,theproportional
devaluation.
as
Followingtheimpacteffect,the moneystockstartsincreasing,

e1 > e, so thattheMIE line shiftscounterclockwise,and theequilibrium

pointshiftsalongHH fromb towardc. Duringthistransitional

period,
the moneysupplyincreasesbecause of bothreservepurchasesand
domesticcreditcreation.As timepasses,m riseswhilee falls.Given
thefixednominalexchangerateE = E1, thefalline is due to a rising
the
priceofhomegoods.Thus,afteran initialperiodofpricestability,
the
in
outcomeof
devaluationis an instantaneous
jump thepricesof
homegoods followedby a smoothrateof increase.Therefore,
the

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to blame the devaluationforthe subsequentinflation

is
temptation
almostunavoidable,althoughcarefulanalysisshowsthatthe devalimuationwas theonlycorrective
measureleft,giventhe structural
balanceprovidedby thefiscalconstraint.
If therateof devaluation
was properly
chosen,reservesmusthave
reachedthetargetlevelRa whentheturning
pointc is reached.At c,
the balanceof paymentsturnsagainintodeficitand theequilibrium
fromc toa,
pointkeepsmovingalongHH towarda. In thetransition
the moneystockkeepsgrowingas domesticcreditcreationexceeds
the value of reservelosses. As e keepsfalling,
PH mustkeep rising.
Sincem is also rising,
therateofmonetary
expansionmustexceedthat
in thepricesof homegoods (whichin turnis largerthan
of inflation
thatof theoverallpricelevel,sincethepricesof tradedgoodsremain
constant).Eventuallye fallsenoughso thatthebalanceofpayments
deficitequals the rateof domesticcreditcreation,and, as pointa is
reachedagain,the nominalmoneystockstabilizes,as also do m, e,
andPH.IfreservesthenstillexceedRm,another
periodofpricestability
a new devaluationwillbe necessary
mayensue,althougheventually
as reserveshitRmand thecyclestartsagain.
In thisdevaluation-inflation
cycle,thepriceof homegoodsexperiences threedistinct
phases:(1) a stableperiod,as thesystemrestsat
a whiledecumulating
reserves;(2) a jump at the momentof thedevaluation,as theequilibrium
pointmovesfroma to b; (3) a positive
butdecelerating
inflation
shiftsbackfromb to
rate,as theequilibrium
a along HH.

withthetroughs
International
reservesfollowa cyclicalpattern
being
reachedwhendevaluations
takeplaceand thepeakswhentheequilibriumpathreachespointc alongHH. The nominalmoneystockfollows
twophases:(1) a stablemoneysupply,as thesystemrestsat pointa;
rateof expansion,as the equilibrium
(2) a positivebut decelerating
movesfromb to a.
PH
Figure4 showsthetypicalpathforthepricelevel. Even though
thesystemhas a built-in
has periodsofstability,
inflation
ratethat,on
average,will equal the averagerateof monetary
expansionforthe
reservestranstypicalcycle.Sinceoverthetypicalcycle,international
actionsdo notcontribute
to themoneysupply(at thegivenexchange
ratereservesare builtup fromRmto Ra and thenlostagain),all the
increasein thenominalmoneysupplymustbe due to domesticcredit
creation;thus,on thetypicalcycle
go~

AD

AM

AM M

M
ME E

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MODEL OF DEVALUATION-INFLATION

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SPIRAL

time
FIGURE 4

AM
so that--

= go/mT

M
where mT = - is the average value of real cash balances in termsof
traded goods. The average inflationrate in the prices of home goods
and of tradedgoods, Tr,equals the average rateof monetaryexpansion
over the cycle, so that
7T = go/mT

III. Flexible Exchange Rates

As we have seen, giventhefiscalconstraint,the objectives of external balance and price stabilityare incompatiblewitheach otherunder
a fixed exchange rate. The resultis a series of periods of balance of
paymentscrisisand devaluationsfollowedby risingprices. The nominal

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suddenjumps,
priceof homegoodsgoes through
phasesof stability,
and steadyinflation,
is notconduciveto an
an outcomethatcertainly
neiand efficient
allocationofresources.In thiscircumstance,
orderly
thera stablenora smoothpathofpricesis achievedunderfixedrates,
and a freefloating
or crawlingpeg systemmaybe preferable.
Under
thefloating
in the
system,thecentralbankabstainsfromintervening
and thenominalexchangeratewilladjustso
foreign
exchangemarket,
thatexternal
balanceis continuously
achieved.SinceR = 0 atall times,
theeconomywillalwaysbe atpointc inFigure3 withtherealexchange
rateat thelevele and inflation
proceedingat thestablerate T =g-

mT

An alternative
to a freelyfloating
rateis a crawling
peg withperiodic
butsmalldevaluations.
In thiscase, thesignalforthedevaluation
can
stillbe givenby thelevelofreserves,butin orderto reducethesize
ofexchangerateadjustment,
theminimum
acceptablelevelRmshould
be putas close as necessaryto theacceptablelevelRa, sincethesize
of theexchangeadjustment
and thelengthof thetypicalcycle vary
withthedifference
betweenR, andR,m
directly

IV. Conclusions
In thispaper,theauthorhas developeda simplemodelto analyze
someoftheessentialelementsoftheinflation-devaluation
spiralinthe
of
a
real
creation
deficit
credit
financed
presence
government
through
the
He
the
central
bank.
has
shown
that
those
circumstances
under
by
of
are
and
balance
inconexternal
objectives pricestability
mutually
sistent,and thatthelikelyoutcome,as theeconomymovesalongthe
and
stagesofthetypicalcycle,is successiveperiodsofpricestability
external
devaluation
followedbyinflation
andexternalsurplus,
deficit,
and finally
inflation
andexternaldeficit.Whilecasualobdecelerating
servation
wouldindicatethatinflation
is beingprecededbydevaluation
and monetization
of theresulting
balanceofpayments
surpluses,the
conclusionthattheexternalsectoris thecause of theinflation
would
be inappropriate.
it is correctthatovera shortperiodfolAlthough
lead the movelowingthedevaluationexternalsectordevelopments
mentin domesticprices,over theentiretypicalcyclethepricelevel
followsthepathofthemoneysupply,whichis determined
entirely
by
domesticcreditcreationto financethe fiscaldeficit.(As we saw in
SectionII, the externalsectordoes not contribute
at all to money
creationover the wholeof the typicalcycle.) Once thepropertime
itfollowsclearlythatthepriceleveland the
dimension
is recognized,

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STYLIZED

MODEL OF DEVALUATION-INFLATION

SPIRAL

89

exchangerateare endogenousvariableswithno directcausalityrelationsbetweenthem,bothbeingled by developments

in themonetary
sector,whichareinturndetermined
oftheinternal
bythemonetization
fiscaldeficit.
REFERENCES
Dornbusch,Rudiger,"CurrencyDepreciation,Hoarding,and Relative Prices," Journal
of Political Economy, Vol. 81 (July/August
1973), pp. 893-915.
Frenkel, Jacob A., and Carlos A. Rodriguez, "Portfolio Equilibriumand the Balance
of Payments:A MonetaryApproach," AmericanEconomic Review, Vol. 65 (September1975), pp. 674-88.
Salter, W. E. G., "Internal and External Balance: The Role of Price and Expenditure
Effects,"Economic Record, Vol. 35 (August 1959), pp. 226-38.

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All use subject to JSTOR Terms and Conditions