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Exchange rate regime proposal for emerging countries: a Keynesian perspective

  • Fernando Ferrari-Filho
  • Luiz Fernando De Paula

This paper presents, in light of Keynesian theory and taking into account the emerging economies' reality in today's global world, an exchange rate regime proposal for emerging countries with the capability to mitigate their external vulnerability and fragility and their dependence on foreign capital, thus making possible the implementation of domestic economic policies that would permit macroeconomic stabilization—understood, following Keynes, as being the combination of price stability and full employment. For this purpose, the paper revisits Keynes's proposals with regard to both exchange rate policy and capital inflows, with a view to showing how they contribute to maintaining full employment, develops a Post Keynesian view on financial globalization and the behavior of exchange rate, and presents a strategy for an exchange rate regime with capital controls for emerging countries.

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

Volume (Year): 31 (2008)
Issue (Month): 2 (December)
Pages: 227-248

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Handle: RePEc:mes:postke:v:31:y:2008:i:2:p:227-248
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  1. Maurice Obstfeld & Kenneth Rogoff, 1995. "The mirage of fixed exchange rates," Working Papers in Applied Economic Theory 95-08, Federal Reserve Bank of San Francisco.
  2. José Luís Oreiro & Luiz Fernando de Paula, 2005. "Strategy for Economic Growth in Brazil: a Post Keynesian Approach," Working Papers 0027, Universidade Federal do Paraná, Department of Economics.
  3. Nicolas Magud & Carmen M. Reinhart, 2007. "Capital Controls: An Evaluation," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 645-674 National Bureau of Economic Research, Inc.
  4. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
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  6. M S Mohanty & Michela Scatigna, 2005. "Has globalisation reduced monetary policy independence?," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 17-58 Bank for International Settlements.
  7. Grabel, Ilene, 1996. "Marketing the third world: The contradictions of portfolio investment in the global economy," World Development, Elsevier, vol. 24(11), pages 1761-1776, November.
  8. Philip Arestis & Luiz Fernando de Paula & Fernando Ferrari-Filho, 2006. "Inflation Targeting In Emerging Countries: The Case Of Brazil," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 42, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  9. Eichengreen, Barry & Tobin, James & Wyplosz, Charles, 1995. "Two Cases for Sand in the Wheels of International Finance," Economic Journal, Royal Economic Society, vol. 105(428), pages 162-72, January.
  10. Jahangir Aziz & Francesco Caramazza, 1998. "Fixed or Flexible? Getting the Exchange Rate Right in the 1990s," IMF Economic Issues 13, International Monetary Fund.
  11. James Tobin, 1978. "A Proposal for International Monetary Reform," Cowles Foundation Discussion Papers 506, Cowles Foundation for Research in Economics, Yale University.
  12. Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, vol. 28(6), pages 1075-1086, June.
  13. Ramon Moreno, 2005. "Motives for intervention," BIS Papers chapters, in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 4-18 Bank for International Settlements.
  14. Antonio J. Alves, Jr. & Fernando Ferrari, Jr. & Luiz F. R. De Paula, 2000. "The Post Keynesian Critique of Conventional Currency Crisis Models and Davidson's Proposal to Reform the International Monetary System," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 22(2), pages 207-225, January.
  15. Guillermo A. Calvo & Frederic S. Mishkin, 2003. "The Mirage of Exchange Rate Regimes for Emerging Market Countries," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 99-118, Fall.
  16. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
  17. Roberto Frenkel, 2006. "An alternative to inflation targeting in Latin America: macroeconomic policies focused on employment," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(4), pages 573-591, July.
  18. Murray Glickman, 1994. "The Concept of Information, Intractable Uncertainty, and the Current State of the "Efficient Markets" Theory: A Post Keynesian View," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 16(3), pages 325-349, April.
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