Abstract
Since the realignment of exchange rates by the Smithsonian Agreement of Decembter 2971, substantial research has been conducted to analyze the effect of that exchange rate change on the U.S. balance of payments. Most of this inquiry, however, focused exclusively on the balance of commodity trade. The effect on the service and capital accounts and the inderect effect through changes in foreign holdings of income-yielding U.S. liquid liabilities were not examined. The exchange rate effect on all the components of the U.S. balance of payments--with specific account taken of the impact on trade, services, and capital flows--deserves systematic analysis. This paper attempts such as analysis utilizing a model of the U.S. balance of payments.
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