Prosperity and Depression.pdf

68 AnalYsis of TheoriesPart I§ 8. INTERNATIONAL COMPLICATIONSA systematic account of the international aspectGuiding of the business cycle on the basis of the theoryprinciples. hitherto Under consideration has never beenattempted. With the help of the theory of theintemational money mechanism, it is, however, possible to traceout the way in which (if one accepts the monetary over-investmenttheory) the course of the cycle in &. particular country must beinfluenced by its position in the intemational economy, and themanner in which the cyclical movement in such country is likelyto react on the country's intemational trade and on the intemalsituation of other countries.As iQ the case ofthe purely monetary explanation ofthe businesscycle, the first questions· to be asked are: How does a given changein the international situation of a country influence the expansionor contraction of credit? Is it likely to facilitate and prolong,or retard, an expansion akeady under way? How is a contractionin process influenced by a given change in other countries? It isimpossible to enumerate and systematise at this point all theconceivable contingencies. But a few principles may be laid downand some illustrations be given.Any improvement in the balance of paymentsInfluencesthrough tbebalance of-that is to say, any increase in the demand forthe means of payment of a given country in termsof the money of other countries-will have anpayments. expansionist influence. This improvement maybe due to a great variety of circumstances-ehangesin the demand for particular commodities, crop changes, capitalmovements, etc. The erection ofnew tariff waIls by an individualcountry, if not followed by compensatory action on the part ofother countries, will have a favourable influence on the internationalmonetary situation of the country which has raised its tariffs. Inother words, it will enable the latter to expand its circulationwithout a deterioration of its exchange rate. Thus, the immediateinfluence of protectionist measures may be a stimulation ofprosperity or an alleviation of depression. But the conditions