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Teaching Post Keynesian Exchange Rate Theory


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  • John Harvey

    (Department of Economics, Texas Christian University)


The goal of this paper is to provide a model and method for those wishing to include the Post Keynesian perspective when teaching exchange rate theory. It begins by reviewing neoclassical approaches (purchasing power parity, the monetary model, and the Dornbusch model) and then develops a graphical Post Keynesian model that is based on Keynes's Z-D diagram, endogenous money, a currency market driven by portfolio capital flows, and no assumption of a tendency toward full employment or balanced trade. The model is then used to look at historical examples and policy.

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File Function: First version, 2006
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Bibliographic Info

Paper provided by Texas Christian University, Department of Economics in its series Working Papers with number 200601.

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Length: 32 pages
Date of creation: Nov 2006
Date of revision:
Publication status: Published in Journal of Post Keynesian Economics, Winter 2007, pages 147-68
Handle: RePEc:tcu:wpaper:200601

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Keywords: exchange rate; Post Keynesian; teaching;

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  1. John Harvey, 2003. "Deviations from Uncovered Interest Rate Parity: A Post Keynesian Explanation," Working Papers 200301, Texas Christian University, Department of Economics.
  2. Lucio Sarno & Mark P. Taylor, 2002. "Purchasing Power Parity and the Real Exchange Rate," IMF Staff Papers, Palgrave Macmillan, vol. 49(1), pages 5.
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