The keynesian and monetary approaches to the balance of payments (case study on the Czech Republic in 1993 - 1999)

In the first part of this article is discussed a theoretic comparison of a standard Keynesian (income) approach and a monetary approach to the balance of payments. The monetary adjustment process is based on the monetarist assumption that money market imbalances affect the real economy and the Keynesian approach is based on a relationship between income and foreign trade. In the second part author describes a theoretic Keynesian-Monetary (K-M) model which is able to illustrate the impacts of the changes of various economic exogenous variables to a development of income and the balance of payments. The main contribution of this paper can be considered in an interpretation of the real economic development in the Czech Republic between 1993 - 1999 by the theoretic K-M and IS-LM-BP models.

Keywords: external balance, monetary approach to the balance of payments, Keynesian (income) approach to the balance of payments, macroeconomic policy, foreign exchange reserves