Global Imbalances, Exchange Rates, and Stabilization Policy

Abstract

This book analyzes key international monetary issues from a macro-foundations perspective. It proposes novel frameworks, mainly diagrammatic, to interpret macroeconomic and financial linkages for globally integrated economies, examining global imbalances, exchange rates, interest rates, international capital flows, inflation, foreign and public debt, as well as the effectiveness of macroeconomic policy under different exchange rate regimes. The work relies heavily on much-neglected economy-wide relations, such as the output-absorption distinction and traditional flow-of-funds analysis, to derive a range of new results.