Hume's specie-flow mechanism and classical monetary theory: An alternative interpretation
Hume's celebrated essay on the international distribution of money has always been criticized for ignoring the law of one price. Contrary to the traditional interpretation, however, Hume actually maintains that law and argues for the stability of long-run equilibrium. Putting money market equilibrium in the foreground, his analysis is essentially founded on the same hypothesis as the modem monetary approach, albeit focusing on the supply rather than on the demand side of the money market. © 1998 Elsevier Science B.v.