Neoclassical and Keynesian Approaches to International Transactions

Andrea Carrera () and Alvaro Cencini ()
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Andrea Carrera: Complutense University of Madrid and Complutense Institute for International Studies
Alvaro Cencini: Università della Svizzera italiana

Chapter Chapter 7 in National and International Monetary Payments, 2024, pp 165-188 from Palgrave Macmillan

Abstract: Abstract The neoclassical approach to international payments is based on the interchangeability of national currencies, as if they were perfect, homogeneous objects of trade. In this context, the relative price of currencies is thought to be the result of the adjustment between the demand for money and money’s supply. This chapter develops a critical survey of the traditional analysis of the sources that lead to exchange rate fluctuations, from trade balances to capital transactions, from economic “fundamentals”—inflation, deflation, and interest rates—to speculation in the euro-dollar or xeno-currency market. The chapter focuses on the role of speculation in exchange rate volatility and delves into the concept of monetary integration as the way to reduce such fluctuations. An assessment is made of Mundell’s Optimum Currency Areas (OCAs), leading to the new proposal for Clearing Integrated Monetary Areas (CIMAs), of which regional monetary payment clearing would be the layer.

Keywords: Neoclassical theory of trade; Exchange rate fluctuations; Optimum Currency Area; Clearing Integrated Monetary Area (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pshchp:978-3-031-51737-2_7

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DOI: 10.1007/978-3-031-51737-2_7

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