Title: International investment and the theory of devaluation
Abstract: The theory of international investment is integrated to the monetary approach to balance of payments. It is shown that in the short run when the level of international investment is given a devaluation may not improve the balance of payments even if the Marshall-Lerner condition is met. If the devaluing country is a net importer of capital, then the chances for a successful devaluation are small. When the level of international investment is variable, a devaluation may not help balance of payments even if goods are gross substitutes. It is also shown that the effects of devaluation on international investment crucially depends on the movement of the terms of trade.
Publication Year: 1983
Publication Date: 1983-08-01
Language: en
Type: article
Indexed In: ['crossref']
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