Harberger-Laursen-Metzler effect is the conjecture that a terms of trade deterioration will cause a decrease in savings and a deterioration of the current account. This is due to the decrease in real income, which will cause an increase in real expenditure (in order to maintain a standard of living). The theory was offered by Harberger (1950) and Laursen and Metzler (1950).
See also
References
- Harberger, A. 1950. “Currency Depreciation, Income and the Balance of Trade.” Journal of Political Economy 58: 47-60.
- Laursen, S. and L. Metzler, 1950. “Flexible Exchange Rate and the Theory of Employment.” Review of Economics and Statistics 32: 281-99.