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The General Theory in an Open Economy

In: Uncertainty, International Money, Employment and Theory

Author

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  • Louise Davidson

Abstract

Keynes’s (1936) General Theory of Employment Interest and Money1 is developed primarily in a closed economy context. Keynes did, however, introduce an open economy analysis when he noted that: (a) trade could modify the magnitude of the domestic employment multiplier (p. 120); (b) reductions in money wages would worsen the terms of trade and therefore reduce real income, while it could improve the balance of trade (p. 263); and (c) stimulating either domestic investment or foreign investment can increase domestic employment growth (p. 335)

Suggested Citation

  • Louise Davidson, 1999. "The General Theory in an Open Economy," Palgrave Macmillan Books, in: Louise Davidson (ed.), Uncertainty, International Money, Employment and Theory, chapter 7, pages 103-118, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-14991-9_7
    DOI: 10.1007/978-1-349-14991-9_7
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