may show itselfon either currentor capitalacount.That is,a current acount deficit may reflect either a community decision to shift out of cash balances into stocks of goods,oa decision to use goods in excess of the community's current rate of production,while a capital account deficit may reflect either a decision to shift out of domestic money into securities or a decision to lend in excess of the current rate of saving. The distinction between"stock"and"flow"balance-of-payments deficits is important for both theory and practical policy,though refincd theoretical analysis has generally been concered,without making the distinction explicit.The importance of the distinction stems from the fact that a"stock"deficit is inherently temporary and implies no real woreningof the country'smi psition,whereasa"flowdeficit is not inherenty temporary and may imply a worsening of the country's economic position. Since a stock decision entails a once-for-all change in the composition of a given aggregate capital assets,a"must necessarily be a temporary in itsfit implies no deterioration (but rather the reverse)in the country's economic position and methods available are familiar.but it may be useful to review them briefly in relation to the framework of analysis developed here Todiscourage the of stcks of goods for domestie them policy authorities may either raise the cost of stock-holding by credit restrictions or reduce its by depreciation.Under both policies,the magnitude of the effectis uncertain-depreciation,by stimulating destabilizing expectations,may even promot stock accumulation-while unavoidable repercussions on the fow equilibrium of the economy are se up.These considerations argument for the usof tbe methodof direct oontrols on stock-holding,an indirect and partial form of which is quantitative import restriction. Todisoourage the substitution of securities for domestic curency,the same bro alternatives are available:credit restriction,which amounts to the monetary authority substituting domestic currency for securities substitution of securities for domestic currency by the rest of the commnity:devaluation,which affects the that the fscto the char the na must be de ce of pev This ed mo in o n with imp 8