This thesis deals with the effect of the fiscal and monetary
policies in the models of the balance of payments for
a small country model with and without nontraded goods.
The first chapter provides an introduction. In Chapter
Two, a balance of payments model which makes no distinction
between traded and nontraded goods is examined under the
fixed and flexible exchange rates. In Chapter Three, the
definition of nontraded goods is given and the Dornbush
model is analyzed in the case of demand shift from the
traded goods to nontraded goods and the transfer payments
to the foreign country. In Chapter Four, a balance of payments
model with nontraded goods is examined under the
fixed and flexible exchange rates. The fifth chapter summarizes
the previous chapters and gives some conclusions.