Mr. Rhomberg, Chief of the Special Studies Division, is a graduate of the University of Vienna and of Yale University and has been a member of the faculty of the University of Connecticut.
Miss Fortucci, research assistant in the special Studies Division, is a graduate of the George Washington University, and of the Johns Hopkins Bologna Center for Advanced International Studies.
Rudolf R. Rhomberg and Lorette Boissonneault, “Effects of Income and Price Changes on the U.S. Balance of Payments,” Staff Papers, Vol. XI (1964), pp. 59–124.
Walter S. Salant et al., The United States Balance of Payments in 1968 (The Brookings Institution, Washington, 1963); also published under the same title by the U.S. Congress (88th Congress, 1st Session), Joint Economic Committee (Washington, 1963) ; hereinafter referred to as the Brookings Report.
See, in particular, The United States Balance of Payments: Statements by Economists, Bankers, and Others on the Brookings Institution Study, “The United States Balance of Payments in 1968” (materials submitted to the Joint economic Committee, 88th Congress, 1st Session, Washington, 1963) ; and Harry G. Johnson, “The International Competitive Position of the United States and the Balance of Payments Prospect for 1968,” Review of Economics and Statistics, Vol. XLVI (1964), pp. 14–32.
Professor Machlup introduces his critical remarks in the volume cited in the preceding footnote by saying, “It is notoriously difficult to do the impossible” (p. 301).
For a detailed description of the structure of the model, see Rhomberg and Boissonneault, op. cit., pp. 61–65.
In this paper, Western Europe is defined as European countries, excluding Spain, in the Organization for Economic Cooperation and Development (OECD), that is, Austria, Belgium, Denmark, France, Federal Republic of Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, and United Kingdom.
The price variable used is the ratio of the implicit GNP price deflator in the importing region to the export price index of the region supplying the imports in question. The implicit GNP price deflator is obtained by dividing GNP in current prices by GNP in prices of the base period. In the following discussion, this will be referred to simply as GNP prices.
Since the sum of the current account balances of the three regions is equal to the increase in the world’s monetary gold stock, the explanatory variable actually used in the model is the item described under (4) in the text, plus the increase in the world’s monetary gold stock. Unfortunately, this was not made sufficiently clear in the discussion in the earlier paper referred to above. The Rest of the World’s current account deficit falls short of the sum of the current account surpluses of the two industrial regions by the increase in the world’s monetary gold stock; and it is only this reduced current account deficit which is, in fact, financed by the Rest of the World’s net receipts of capital and aid and by a decumulation of its gold and foreign exchange reserves.
The actual growth rate in 1960–64 of U.S. real GNP is equal to that in the alternative assumptions.
Rhomberg and Boissonneault, op. cit., especially Appendix III, pp. 110–12.
The computations were made in the spring and early summer of 1964.
Rhomberg and Boissonneault, op. cit., p. 70.
The error is in Table 12, ibid., p. 109. The corrected table is shown below in Appendix II (Table 8). It should be noted that the same error, is found in Table 4 of the earlier paper (p. 73), which shows selected values from Table 12 in that paper. See also Appendix II below.
This compares with a projected value of $8.3 billion in the March 1964 paper, ibid., p. 79. As mentioned above, the effects of various revisions canceled one another to some extent, leaving the projected balance almost unchanged.
Net exports of goods and services as defined in the national income accounts (rather than the corresponding current account balances from balance of payments statistics) are used in the model; this is done in part, because there is no consolidated balance of payments statement for Western European countries as a group, whereas the Consolidated national income statistics of European countries of the OECD show the net exports of goods and services of this region.
Economic Report of the President (together with the Annual Report of the Council of Economic Advisers, Washington, January 1964), pp. 51–52.
Rhomberg and Boissonneault, op. cit., Table 12, p. 109.
Ibid., p. 73.