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

358 INTERNATIONAL TRADE Then it can be laid down that, if the quantity of money be doubled in a given country, and if prices be doubled in consequence, the rate of foreign exchange will settle down in the long run to a figure in accord with the change in its prices relative to prices in other countries. But if something happens to disturb the conditions of demand for exports or imports; or if invisible items enter which disturb the barter terms of trade — then the purchasing-parity doctrine does not hold. And if both sets of forces vary together, if there be changing monetary conditions, and also changes in the conditions of demand, and (or) in the invisible items, the doctrine does not hold. The exchange rate then may vary within limits that are potentially wide. APPENDIX In the following pages I work out in detail, and illustrate by figures, the lines of analysis followed in the body of the chapter, the object being to show with the explicitness of figures how the rates of exchange shape themselves, how prices shift in the trading countries, how sales and purchases are carried out in the moneys of the countries, how the barter terms of trade work themselves out. The reader to whom this sort of treatment seems otiose can omit. The figures have not always been carried out meticulously to the last frac- tion. Here, as in other numerical illustrations used in the present volume, results in round numbers have been thought to suffice. Let us suppose, as before, a situation in which the United States and Great Britain each have inconvertible paper. The American paper is more abundant (relatively to the traditional gold currency of the two countries) than the British. The rate of exchange with which we begin is £1 = $10.00; or $1 = 2 shillings. Following the existing and long-established practice, we may still quote the rate in the way first stated, that is, so many dollars to the pound. And we may assume, as in previous illustrative figures, that all the exchange transactions are carried on in New York. The successive stages in a series of representative situations may now be followed. (1) Begin by assuming a stage of simple equilibrium, in which the only dealings between the two countries arise from merchandise transactions. Let cotton stand for the goods exported by the United States to Great Britain, and steel for the goods which Great Britain exports. Suppose that U. S. sends to G. B. 50 million cotton @ 4.84. = £1,000,000 G. B. sends to U. S. 50 million steel @ $0.20 = $10,000,000

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