e further difference between types of mdel of balance-of-payments theory is worth noting.Whereas the Keynesian model assumes that employment and output are variable at (relatively)constant prices and wages,the monetary models assume that output and employment levels,with reactionstochangestaking the price and wage adjustments.This difference mirrors a broader difference between the Keynesian and quantity theory approaches to monetary theory for the closed economy.The assumption of full these models areomed with the longer run,and that for this perspective the assumptionof full employment is more appropriate than the assumption of general mass unemployment for the the end of Worid War II. 1 now tufrom the discussion of theoretical issues in mode-oonstruction ton exposition ol some monetarist models of balance-of-payments behaviour in a growing world economy.The models to be are extremely simple,insmuch as the veral balance of the balance of payments,i.e.on the trend of international reserve acquisition or loss,and ignore the composition of the balance of payments as between current account,capital and veral the structureof the balance ol-payments accounts that may occur as a country passes through various stages of economic growth Nevertheless they will,I hope,provide some interesting insights into balance-of- To begin with,it is useful to develop some general expressions relating the growth rates of economie aggregates to the growth rates of their components or of the independent variables to which they are.by elementary calculus,and are merely stated here.In the formulas,g is the growth rate per unit of time of a subscripted aggregate or variable,A and B are components of an aggregate,f(A,B)is a function of A and B,anddenotes the elasticity of the agregate defined by the function with respect to the subscripted variable.Then we have Ra”AB队+A平B别 8A-B=A-B &A -A-B 8B EAB =gA +gB 8A/B =BA-8B gf(A.B)TABA BEB (where denotes an elasticity). exchange rate with the rest of the world,assumed to be growing over time.and small enough and diversified enough in relation to the world economy for its price level to be the world price level,and its the orld inter rate.(Differ and foreig 22