Some Reflections on the Teaching of International Monetary Economics

This paper presents a critical analysis of the way in which international monetary economics is normally taught. On the one hand, we show how the most popular international economics manuals deal with exchange rate theory and its link with balance of payments equilibrium. In particular, we stress how the framework proposed in these manuals cannot explain one of the biggest macroeconomic problems of our time, namely structural balance-of-payments disequilibria. On the other hand, we put forward an alternative Keynesian model. Assuming neither full employment nor balanced trade over the short or long run, the paper is intended as a new contribution to the post-Keynesian analysis of exchange rate theory. Finally, our model gives an original insight into the relationship between liquidity trap and structural economic imbalances in modern economies.