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Macroeconomics of an Open Economy

In: The Evolution of Macroeconomic Theory and Policy

Author

Listed:
  • Kamran Dadkhah

    (Northeastern University)

Abstract

Up to the 1960s the Keynesian model of macroeconomics pertained to a closed economy. That is, an economy that has no international trade or movement of capital. In modern times no country could be found to conform to such a description. The model was defended on the ground that it was a first approximation. It was argued that in the case of some countries such as the United States, the amount of international trade compared to the GDP was so small as to be negligible for the sake of analysis. For countries such as small European countries exports and imports were a substantial proportion of the GDP. Therefore, the approximation would be off the mark. But it was argued that if somehow the external balance was maintained, the internal macroeconomic issues could be analyzed separately from international problems.

Suggested Citation

  • Kamran Dadkhah, 2009. "Macroeconomics of an Open Economy," Springer Books, in: The Evolution of Macroeconomic Theory and Policy, chapter 0, pages 103-116, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-77008-4_5
    DOI: 10.1007/978-3-540-77008-4_5
    as

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