A post Keynesian framework of exchange rate determination: a Minskyan approach

Abstract

This paper proposes a general framework to analyze exchange rate determination from a post Keynesian perspective based on chapter 17 of the General Theory. The paper shows that this framework accounts for both the importance of context and time-specific expectations put forward by existing post Keynesian exchange rate theory, and for the hierarchic and structured nature of the international monetary system that is crucial to understanding exchange rate movements in developing and emerging countries (DECs). To analyze these currency hierarchies, the paper presents a novel Minskyan approach that emphasizes the structural determinants of these hierarchies and currency positions in international debtor–creditor relations. This approach can better account for DECs’ continued monetary subordination and points to the endogenous and self-perpetuating nature of international monetary hierarchies.