Growth of Income and the Balance of Payments: Keynesian and Monetary Theories

Abstract

With regard to the effect of growth on the balance of payments of a country, the conclusion of the Keynesian theory of income determination sharply differs from that of the monetary theory. This article suggests an integrated approach towards the derivation of the import function and the balance of payments equation for a money‐using economy from the utility‐maximising behaviour of individuals. Thereby, it shows that the difference between the conclusions of the two theories results from an incorrect specification of the balance of payments equation in the Keynesian theory.

Citation

Beladi, H., Biswas, B. and Tribedy, G. (1986), "Growth of Income and the Balance of Payments: Keynesian and Monetary Theories", Journal of Economic Studies, Vol. 13 No. 4, pp. 44-55. https://doi.org/10.1108/eb002632