Chapter 7: Open-economy macroeconomics
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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