Mr. Alexander, Acting Chief of the Finance Division, is a graduate of Harvard College and the Harvard Graduate School. He was formerly Assistant Professor of Economics at Harvard College, and during the war was connected with the Office of Strategic Services. He has been consultant to the U.S. Treasury Department, U.S. State Department, Economic Cooperation Administration, and U.S. Department of Defense.
See A. P. Lerner, The Economics of Control (New York, 1946), p. 378; Joan Robinson, “The Foreign Exchanges,” Essays in the Theory of Employment (2d ed., Oxford, 1947), p. 143, fn., reprinted in Readings in the Theory of International Trade (H. S. Ellis and L. Metzler, eds., Philadelphia, 1949), p. 93, fn. 10; A. J. Brown, “Trade Balances and Exchange Stability,” Oxford Economic Papers, No. 6 (1942), pp. 57-76; Lloyd Metzler, “The Theory of International Trade,” A Survey of Contemporary Economics (H. S. Ellis, ed., Philadelphia, 1948), p. 226.
This might be taken by the ambitious reader to mean the whole set of changes in the output of various goods and services each taken separately. Any linear coefficient, such as the propensity to absorb, which appears as a simple constant in this discussion could also be re-interpreted as an appropriate vector or matrix which multiplies the income or price vector. In short, the analysis will proceed in terms of a highly simplified model which could be made much broader by a re-interpretation of the symbols.
It makes no difference for the formal analysis whether Y is taken net or gross, i.e., whether it is national income or gross national product, provided A is correspondingly defined as net or gross. For convenience, Y will subsequently be referred to as national income, or, more briefly, income.
Fritz Machlup, International Trade and International Income Multiplier (Philadelphia, 1943) and J. E. Meade, The Balance of Payments (London, 1951).
See Seymour Harris, Exchange Depreciation (Cambridge, Massachusetts, 1936), especially pages 6 and 7.
See J. J. Polak and T. C. Chang, “Effect of Exchange Depreciation on a Country’s Export Price Level,” Staff Papers, Vol. I, pp. 49-70 (February 1950) for statistical evidence that, as far as effectiveness in altering export prices relative to those of competitiors is concerned, the effects of a devaluation tend to be much stronger in depression than in full prosperity or inflation. However, Barend de Vries, in an unpublished paper, found that there was little difference in the competitive price effects of important devaluations as between the extreme depression period 1931-33 and the recovery years 1935-36. Deflation in non-devaluing countries in the earlier period tended somewhat to reduce the competitive advantages gained by the devaluers, while presumably in the later period the rise of domestic prices in the devaluing countries themselves also tended to reduce the competitive price effect of the devaluation.
Theoretically it is also possible through improving the terms of trade as well.
See Sidney S. Alexander, “Devaluation Versus Import Restriction as an Instrument for Improving Foreign Trade Balance,” Staff Papers, Vol. I, pp. 379-96 (April 1951).