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Full Employment, Open Economy Macroeconomics, and Keynes' General Theory: Does the Swan Diagram Suffice?

Author

Listed:
  • Paul Davidson

    (University of Tennessee.)

Abstract

This paper provides critical comments on the Peter Temin - David Vines promotion of the basic Swan Diagram as (1) a policy tool to encourage any individual debtor nation experiencing balance of payment deficits to reduce its exchange rate in order to expand exports and reduce with Keynes's analysis. Instead Keynes advocated that the onus should be placed on creditor nations to correct international payments imbalances and thereby promote economic expansion internationally. Keynes warned against any deficit nation adopting a policy that tries to achieve a balance in its international payments by following any policy designed to reduce imports and increase exports. Such a policy sends a contractionary force onto the international economy and tends to injure all trading partners.

Suggested Citation

  • Paul Davidson, 2016. "Full Employment, Open Economy Macroeconomics, and Keynes' General Theory: Does the Swan Diagram Suffice?," Working Papers Series 35, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:35
    DOI: 10.2139/ssrn.2735590
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    File URL: http://dx.doi.org/10.2139/ssrn.2735590
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    More about this item

    Keywords

    Swan Diagram; balance of payments; fiscal policy; neoclassical Synthesis; Keynesianism; Post Keynesianism.;
    All these keywords.

    JEL classification:

    • B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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