Currency hierarchy: the concept and implications for the policy space for peripheral economies

Luiz Fernando de Paula, Barbara Fritz and Daniela Magalhães Prates

Chapter 2 in Currency Hierarchy and Financial Globalisation, 2026, pp 31-56 from Edward Elgar Publishing

Abstract: This chapter provides the main theoretical insights of the book: it develops the concept of currency hierarchy in a formal way. For this purpose, we bring together the Latin American structuralist perspective with a post-Keynesian approach. Formally, we develop a concept of exchange rate market equilibrium between currencies with different liquidity premia for the relatively simpler world of financial internationalisation and a second variant for the more complex world of financial globalisation, considering new and diversified financial instruments. Furthermore, we also develop our view of the concept of international financial subordination of EMEs as the result of two interconnected forces: the monetary and the financial asymmetries. We also offer a deep dive into the limits of macroeconomic policy space for countries with currencies at the bottom of the currency hierarchy and its specific dimensions in terms of, for example, monetary, exchange rate and fiscal policies.

Keywords: Keynesian-structuralist approach; Currency hierarchy; Financial globalisation; Emerging market economies; International financial subordination; Keynesian policies (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035328826
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