By Anthony John Makin

This publication analyzes key foreign financial concerns from a macro-foundations point of view. It proposes novel frameworks to interpret macroeconomic and monetary linkages for globally built-in economies, studying international imbalances, trade premiums, rates of interest, foreign capital flows, inflation, international and public debt.

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Current Account Position Revisited’, NBER Working Paper No. 10869. Radelet, S. and Sachs, J. (1998) ‘The East Asian Financial Crisis: Diagnosis, Remedies, Prospects’, Brookings Papers on Economic Activity, 1, 1–74. Rogoff, K. Husain, A. Mody, A. Brooks, R. and Oomes, N. (2004) Evolution and Performance of Exchange Rate Regimes, IMF Occasional Paper 229, Washington, DC. Truman, E. (2005) ‘Postponing Global Adjustment: An Analysis of the Pending Adjustment of Global Imbalances’, Institute for International Economics Working Paper No.

Freund, C. (2005) ‘Current Account Adjustment in Industrial Countries’, Journal of International Money and Finance, 24, 1278–98. Furman, J. and Stiglitz, J. (1998) ‘Economic Crises: Evidence and Insights from East Asia’, Brookings Papers on Economic Activity, 2, 11–35. , Moreno, R. and Spiegel, M. (2001) Financial Crises in Emerging Markets, Cambridge University Press, Cambridge, UK. Goldstein, M. (1998) The Asian Crisis: Causes, Cures and Systemic Implications, Institute for International Economics, 55, Washington, DC.

In turn, domestic interest rates are influenced by the money supply. Total expenditure in an open economy includes spending on imported goods and services whose prices are initially set in foreign currency. A stronger exchange rate lowers the domestic currency price of imports, increasing import demand and total expenditure. 3. 3 Exchange rates and output – expenditure imbalances Global Imbalances and Exchange Rates 37 As China’s national product includes that part of output sold abroad as exports, total output is positively related to competitiveness, which, given the assumption about short-run price level stability, reflects nominal exchange rate movements.

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