John Wheatley's Theory of International Monetary Adjustment

An overlooked classical monetary theorist, Wheatley integrated the quantity theory, the purchasing power parity doctrine, and the notion of gold arbitrage into a coherent account of the international mechanism. To him, exchange rate depreciations, gold price premia, and specie drains constituted proof of overissue. He distinguished between large- and small-open-economy models, proposed indexation as a remedy for inflation, and recognized that all nations can overissue indefinitely if they expand in step. These contributions merit him a place in the classical pantheon.