This paper generalizes the Global Correspondence Principle by extending, in two major ways, Paul Samuelson's 1971 analysis of the exchange rate response to an international purchasing-power transfer. We analyze the price effect of a shift in any parameter, not necessarily a transfer. We then explore the resulting adjustments in any nonprice variable such as we/fare. As our analysis shows, the direction of these adjustments depends neither on whether they are small or large nor on whether equilibrium is locally stable or unstable.
Economics | International Economics
Jagdish N. Bhagwati, Richard A. Brecher & Tatsuo Hatta,
The Global Correspondence Principle: A Generalization,
Am. Econ. Rev.
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