According to the monetary approach,balance-of-payments disequilibriums are the result of imbalances in a country's money supply and money demand.

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According to the monetary approach, balance-of-payments disequilibriums are the result of imbalances in a country's money supply and money demand. Specifically, when a country's money supply grows faster than its money demand, domestic prices rise, making its goods and services less competitive in international markets and leading to a current account deficit. Conversely, when a country's money supply grows slower than its money demand, domestic prices fall, making its goods and services more competitive in international markets and leading to a current account surplus.

According to the Monetary Approach,balance-Of-Payments Disequilibriums Are the Result of Imbalances