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Economic Quarterly

Summer 1994

John Wheatley's Theory of International Monetary Adjustment

Thomas M. Humphrey

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.

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