Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/247436 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 2021-18
Publisher: 
University of Massachusetts, Department of Economics, Amherst, MA
Abstract: 
A rich recent literature reinvestigates the nature of money, but little attention has been paid to the ramifications of the ways in which we theorize money for the theory of international trade. This paper examines the logical relationship between the neutrality of money and self-balancing trade based on Henry Thornton and David Ricardo as two foundational contributions to credit and commodity money theories respectively. I show that both authors theorize trade as self-balancing whenever money is conceptualized as neutral. I distinguish two notions of the neutrality of money: ex ante and ex post neutrality. In Thornton's Paper Credit money is not neutral ex ante: there can be temporary trade imbalances. But in the long-run money is neutral ex post and international trade boils down to self-balancing barter. In Ricardo money is neutral both ex ante and ex post and international trade is always balanced unless central bank policy undermines monetary neutrality.
Subjects: 
Neutrality of money
Thornton
Ricardo
international trade
monetary policy
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

Files in This Item:
File
Size
490.82 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.