Price specie flow mechanism
- Price specie flow mechanism
The Price-specie-Flow Mechanism is a logical mechanism created by David Hume which dispelled the Mercantilist (1700-1776) notion that a nation can have a continuously favorable balance of trade. Under the rules of the Gold standard,each nation’s currency consisted either of gold itself, or of paper currency fully backed(convertible) by gold. Consequently, in the absence of any sterilization, money supply would fallin the deficit nation and rise in the surplus nation as external balances were settled by payment ingold. Since the popular economic theory at the time for explaining monetary equilibrium andformation of domestic prices was the so-called quantity theory of money, a fall in the moneysupply would cause internal prices to decline, just as an increase in money supply would causeprices to rise in proportion. As a result, the relative prices of the deficit nation would fall,causing its exports to rise and imports to fall. The opposite changes took place in the surplusnation. And this process of adjustment through prices was expected to continue until balance ofpayments equilibrium (current A/C only) or external balance were fully restored in each nation.
Wikimedia Foundation.
2010.
Look at other dictionaries:
Price-specie-flow mechanism — Adjustment mechanism under the classical gold standard whereby disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of specie ( gold coins) that would act to equalize prices across countries and … Financial and business terms
price-specie flow mechanism — Adjustment mechanism under the classic gold standard allowing disturbances in the price level in one country to be wholly or partly offset by a countervailing flow of specie ( gold coins) that would act to equalize prices across countries and… … Financial and business terms
Fixed exchange-rate system — Foreign exchange Exchange rates Currency band Exchange rate Exchange rate regime Exchange rate flexibil … Wikipedia
Gold standard — For other uses, see Gold standard (disambiguation). Under a gold standard, paper notes are convertible into pre set, fixed quantities of gold. The gold standard is a monetary system in which the standard economic unit of account is a fixed mass… … Wikipedia
David Hume — For other people named David Hume, see David Hume (disambiguation). David Hume David Hume Born 7 May 1711(1711 05 07) Edinburgh, Scotland Died 25 August 1776( … Wikipedia
List of economics topics — This aims to be a complete list of the articles on economics. It does not include articles about economists, who are listed in the list of economists. NOTOC A * Accounting Accounting reform Actuary Adaptive expectations Adverse selection Agent… … Wikipedia
Financial repression — is a mechanism by which governments buy foreign bonds in an effort to sterilize currency. The degree to which this process occurs is directly proportional to the liberality of said political economy. The effects of financial repression are to… … Wikipedia
Monetary Approach to The Balance of Payments — refers to the key ideas and subsequent research of David Hume conducted in the late 1950s, the 1960s and early 1970s. David Hume presented the price–specie flow mechanism against the Mercantilist approach that stated favorable balance of trade is … Wikipedia
Four Dissertations — is a collection of four essays by the Scottish enlightenment philosopher David Hume, first published in 1757. The four essays are: The Natural History of Religion Of the Passions Of Tragedy Of the Standard of Taste Contents 1 The Natural History… … Wikipedia
Of Miracles — is the title of Section X of David Hume s An Enquiry concerning Human Understanding (1748). Contents 1 The text 2 The argument 3 Criticism 4 Notes … Wikipedia
