Balancing Mechanisms
One of the three fundamental functions of an international monetary system is to provide mechanisms to correct imbalances.
Broadly speaking, there are three possible methods to correct BOP imbalances, though in practice a mixture including some degree of at least the first two methods tends to be used. These methods are adjustments of exchange rates; adjustment of a nations internal prices along with its levels of demand; and rules based adjustment. Improving productivity and hence competitiveness can also help, as can increasing the desirability of exports through other means, though it is generally assumed a nation is always trying to develop and sell its products to the best of its abilities.
Read more about this topic: Balance Of Payments
Famous quotes containing the word balancing:
“Communication is a continual balancing act, juggling the conflicting needs for intimacy and independence. To survive in the world, we have to act in concert with others, but to survive as ourselves, rather than simply as cogs in a wheel, we have to act alone.”
—Deborah Tannen (20th century)