Coordination and Harmonization of Stabilization Policies Among Countries, with Special Reference to Britain an the EEC and Discussions

I hope, for the sake of economics, that the Keynesian and monetafist approaches do not lead to such opposite results as Professor Claassen supposes. I believe, in fact, that Professor Claassen imputed to a difference in economic analysis what is really due to a difference in. the situations under examination. The situation which Professor Claassen examines in his comment is one which in Keynesian terms could be described as an autonomous decline in liquidity preference. The situation I was examining was an increase in the incentive to invest. If I had started from a decline in liquidity preference I would have reached -on quite Keynesian lines -results very similar to Claassen’s. I chose to examine disturbances in the incentive to invest because I think them more important as a rule than disturbances in liquidity preference, but in the future, I shall take account of both sorts. Incidentally, the situation examined in the footnote of Claassen’s comment is. much closer to the one I had in mind. But I believe he has failed to analyze it completely. The capital balance surplus, in a situation of perfect interest arbitrage, could not conceivably stop short at the point at which it merely offset the trade balance deficit unless the excess demand for goods from which you start were confined to tradables. Otherwise there would necessarily be a rise in domestic prices, which would evoke an increase in the stock demand for money and an additional flow demand for money and supply of securities to the foreigner. This will ensure a surplus in the overall balance of payments. If I may be permitted to add a historical comment, my results do not derive from the Keynesian literature of the 1960s, but go back to the literature of the 1930s, in particular to Haberler’s Prosperity and Depression, for which I helped to write the international trade chapter.