Post-Keynesian Economics
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Post-Keynesian Economics

New Foundations

Marc Lavoie

The book is a considerably extended and fully revamped edition of the highly successful and frequently cited Foundations of Post-Keynesian Economic Analysis, published in 1992. It provides an exhaustive account of post-Keynesian economics and of the developments that have occurred in post-Keynesian theory and in the world economy over the last twenty years. Topics covered include open-economy issues, the methodological foundations of heterodox economics, consumer theory, firms and pricing, money and credit, effective demand and employment, inflation theory, and growth theories.
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Chapter 7: Open-economy macroeconomics

Marc Lavoie


Dealing with an open economy is not an easy task. First, there is a great deal of confusion regarding international monetary relations, as can be ascertained by readings and policy discussions on global imbalances, the possible destabilizing impact of incoming financial flows, the role of the US dollar, the impact of rising foreign exchange reserves, the causes of exchange rate changes, the effects of currency devaluation, the advantages of dollarization or of euroization, not to mention the impact of free trade, tariffs and many other subjects related to international trade. Second, there is no consensus post-Keynesian view on open-economy macroeconomics, so this makes it rather difficult to present what ought to be ‘the’ post-Keynesian foundations of open-economy theory within a single chapter. Indeed, some papers on the topic appear rather conventional.

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