International economic equilibrium and foreign exchange rates

Abstract

The article takes up a decisively critical position with regard to monetary devaluations as a remedy for the disequilibrium of international payment accounts. The author makes a theoretical examination of the effects of exchange rate variations under a fully planned economy, in a socialist economy based on price mechanism, in a free or quasi-free economy, and under a mixed system; and in support of his thesis he discusses the practical results obtained, comparing the variations of exchange rates in Great Britain and France during the inter-war period. In his opinion, the favour still enjoyed by the system of currency devaluations - “undoubtedly a tempting method for the government” - is partly due to tenacious delusions still surviving on spontaneous automatism, and partly to vested interests that find in devaluation profit opportunities.

JEL: F31, F32