ABSTRACT
This chapter presents and compares Ricardo's monetary and foreign exchange analysis in the writings of 1809–1811. It illustrates the main features of the 1809–1811 analysis. According to Ricardo, the value of money in two trading countries must be equal for the foreign exchange equilibrium to be reached. The chapter emphasizes several notions such as the price-specie flow mechanism, the quantity theory and criticism of Thornton's gold points mechanism. It presents the theory of comparative advantage. Emphasis is placed on the distinct effects and mechanisms that intervene in the dynamics of money prices and wages that lead to international specialization. The numerical example is used to bring to light the quantity of labour effect, the gold points mechanism, the quantity of money effect and the substitution of imports for production effect that lead to the money prices linked to the "magic numbers".
