AN EMPIRICAL EXAMINATION OF INTERNATIONAL MONETARISM: A CASE STUDY OF SWEDEN
The monetary approach to the balance of payments is an offshoot of domestic monetarism which presents an alternative theory of international imbalance--one that highlights and brings to the forefront the role of monetary variables. This open economy macrofinancial model postulates that external disorders reflect disequilibrium between the demand for and supply of money. Deficits are rooted in excess credit creation by a central bank. In treating the monetary sector and the balance of payments as inseparable, international monetarism concentrates attention on monetary and financial flows by partitioning the component items of the balance of payments. By focusing exclusively on the official settlements balance, the balance of payments is viewed as a monetary phenomenon.^ Contemporary theoretical and empirical research has been directed at investigating this model both for periods of fixed exchange rates and managed floats. Because the monetary model was developed primarily to explain international reserve flows for small industrial economics, a study of Sweden seemed particularly relevant and suited to this purpose.^ An interrated theory of global inflation has also been developed. This monetary approach to inflation identifies world reserve growth as the proximate cause of rising world prices.^ The objective of this dissertation has been to examine both the reserve flow and exchange market pressure formulations as well as the monetary approach to international inflation. The important issues of causality and structural stability were addressed in each case.^ Each monetary model received extensive statistical confirmation. Both the empirical equations and the questions of temporal precedence affirmed international monetarist thinking. It was also determined that the transition from fixed to floating rates of exchange did not alter the basic structure of the relationships. ^
KJETSAA, RICHARD WILLIAM, "AN EMPIRICAL EXAMINATION OF INTERNATIONAL MONETARISM: A CASE STUDY OF SWEDEN" (1985). ETD Collection for Fordham University. AAI8521411.