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The International Economy: Bind or Boon?

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  • Jagjit S. Chadha

Abstract

The Institute has long examined overseas developments in order to understand better domestic macroeconomic dynamics. The organising principle for much of the postwar period was simply the impact on net trade with an implicit view on whether the exchange rate was at an appropriate level and, as such, the external sector was viewed as a constraint on domestic activity. Increasingly integrated factor markets in the modern era of globalisation means that the overseas sector plays a fundamental role in the evolution of both aggregate demand and supply in the UK economy and it is increasingly hard to disentangle the overseas from the domestic sectors. It is not so much that we should reverse this integration but more how to design policy to limit any undesirable consequences on regional and income distribution, as well as aggregate fluctuations in activity.

Suggested Citation

  • Jagjit S. Chadha, 2018. "The International Economy: Bind or Boon?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 246(1), pages 50-63, November.
  • Handle: RePEc:sae:niesru:v:246:y:2018:i:1:p:r50-r63
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    Keywords

    Mundell-Fleming model; Salter-Swan diagram; external position;
    All these keywords.

    JEL classification:

    • B27 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - International Trade and Finance
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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