International Trade and Simple Keynesian Model (Fixed Exchange Rate Regime)
This video considers an open economy under a fixed exchange rate regime, without any international flow of services or capital. It explains the determination of internal as well as external equilibrium considering the domestic absorption, hoarding and trade balance (only commodity market equilibrium ). Moreover, it explains the policies to ensure internal and external balances. This also focuses on the strategy of devaluation and expenditure switching and the derivation of famous M-L condition of successful devaluation.
#macroeconomics #internationaleconomics #devaluation '
Suggested Reading: Rivera Batiz, F.L. and Rivera Batiz L (1994). International Finance and Open Economy Macroeconomics (2nd Ed), Macmillan Publication co. Chapter-5
