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Teaching Post Keynesian exchange rate theory

  • John T. Harvey

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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Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

Volume (Year): 30 (2007)
Issue (Month): 2 (December)
Pages: 147-168

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Handle: RePEc:mes:postke:v:30:y:2007:i:2:p:147-168
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  1. Sarno, Lucio & Taylor, Mark P, 2001. "Purchasing Power Parity and the Real Exchange Rate," CEPR Discussion Papers 2913, C.E.P.R. Discussion Papers.
  2. John T. Harvey, 2004. "Deviations from uncovered interest rate parity: a Post Keynesian explanation," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 27(1), pages 19-35, October.
  3. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, June.
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