International trade

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Monograph

Identifikator:: 1758394757

URN:: urn:nbn:de:zbw-retromon-136209

Document type:: Monograph

Author:: Taussig, Frank William http://d-nb.info/gnd/120199459

Title:: International trade

Place of publication:: New York, NY

Publisher:: Macmillan

Year of publication:: 1927

Scope:: XXI, 425 Seiten; graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part III. International trade under inconvertible paper

Collection:: Economics Books

THE UNDERLYING PRINCIPLES 345 value of the two, expressed in the currency of either country, is the same. The price of foreign exchange thus may change without any movement in the general range of prices in either country. And it may change very much indeed. Therein, of course, the situa- tion differs radically from that under gold-standard conditions. When gold is the standard in both countries, foreign exchange fluctuations remain within narrow limits, whereas the level of prices in each country, tho it changes but slowly, is subject to no restrictions at all analogous. When, however, there are dislocated exchanges — the monetary conditions in each country remaining constant, as here assumed — the level of prices in each country remains the same (subject to a minor correction presently to be stated) even under the impact of great disturbances in international trade, whereas the foreign exchanges may show wide and rapid fAuctuations. It is in this respect — the possibility of wide fluctuations in the rate of exchange — that the conditions differ most obviously from those of transactions under the gold standard. When gold can flow from country to country, such a change in the balance of payments as has just been supposed does indeed bring its first impact on the quotations for foreign exchange. But those quotations must re- main within the narrow limits of the gold points. Soon specie begins to move, and then further movements begin, in prices and in the movement of goods. Under paper-standard conditions, how- ever, exchange may fluctuate widely, may soar or decline with the changing volumes of remittances ; but nothing therein disturbs the general monetary situation. This then is our first proposition, and a fundamental one. In the absence of a common monetary standard, the rate of foreign exchange depends on the mere impact of the two quantities on hand at the moment.! We may proceed now to the next stage: how the movement of ! This general line of reasoning on the equalization of payments thru alterations in the rates of foreign exchange is fully worked out in a notable paper by Professor J. W. Angell, International Trade Under Inconvertible Paper, Quarterly Journal of Economics, Vol. 36 (May, 1922). Essentially the same reasoning underlies Hawtrey’s compact treatment in his Currency and Credit (p. 61. 2nd edition).

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