INFLATION, UNEMPLOYMENT AND EXTERNAL DEFICIT: THEORETICAL OBSERVATIONS AND POLICY CONSIDERATIONS

Students of balance of payments theory are undoubtedly familiar with the various discussions concerning the use of monetary‐fiscal policies to attain internal and external balance. The seminal contributions to this particular branch of balance of payments theory are commonly associated with R.A. Mundell [1960, 1961, 1962, 1963], though it might be noted, in passing, that the problem had received attention even earlier from W.M.Corden [1960], T.W.Swan [1955], and others. Mundell's efforts, in turn, stimulated during the 1960's a considerable body of literature on the subject, a representative sample of which includes contributions by Fleming [1962], H.G. Johnson [1966], Krueger [1967], Levin [1968], Ott and Ott [1968], and Sohmen [1967]. That the subject continues to command interest is evidenced by such recent papers as those of Argy [1971], Fausten [1971], Leighton [1970], Wrightsman [1970], and Zelder, Ross, and Collery [1972]. Moreover, it is quite apparent that this interest is further reinforced by the current preoccupation with the implications of the proposed European monetary unification for the domestic policies of the individual EEC countries.