The money supply and the balance of payments in Ceylon

Abstract

The present article devotes particular attention to the problems connected with the functions of the Central Bank in Ceylon and the criteria according to which it should conduct its operations. According to the author, these functions and criteria would need to be remodelled, as compared with the norms of traditional orthodoxy, in order for them to be made adequate to the development requirements of dependent and backwards economies. In his view, the dilemma which, in an underdeveloped economy based on exports, faces those who are responsible for credit policy seems to be impossible to solve along traditional lines. In any case, he observes, “a mechanical anti-inflationary policy during a boom is definitely ill-advised, for it is only during a boom that the internal sector of the economy experiences  even a slight increase in employment and activity”.

JEL: E51, E52, E58, F32