* Peter Kriesler and John Nevile With floating exchange rates, high capital mobility may render expansionary fiscal and monetary policy ineffective (or even counterproductive) . . . Internationalization will undermine the autonomy and efficiency of government macroeconomic policy. (Milner and Keohane, 1996, p. 18) INTRODUCTION Globalization has led to substantial changes to the economies of many nations. The contemporary form of globalization has substantially increased the degree of openness of most economies, both in terms of international capital flows and in trade, and it represents an almost overwhelming force impacting on all countries. This paper considers some of the implications of the macroeconomic impact of globalization on nation states within an explicitly Keynesian/Kaleckian framework. Two interrelated forms of macroeconomic impact are considered. Initially, the general implications of globalization for the output and growth of national economies are examined, before turning to the constraints imposed on the ability of governments to influence the macroeconomy via traditional polices. In terms of macroeconomic outcomes, a major impact of globalization is on the level of employment and output through the balance of trade. Increased openness increases reliance on international trade. This, of course, need not be, per se, a problem. Difficulties arise due to the lack of effective instruments to deal with balance of trade imbalances, particularly deficits. The implications of this lack of instruments are to establish a deflationary/contractionary bias in the international monetary system, with important implications for the growth of output and employment. The problem is exacerbated by the limitations on macroeconomic stabilization policy resulting...
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