Open Economy Macroeconomics: Developments in Theory and Policy Using the TOPSIS Methodology

Abstract

Open economy macroeconomics examines the complex interplay between a nation's economic policies and global financial markets. This field of study addresses critical issues such as exchange rate determination, balance of payments, and the effects of trade and capital flows on a country's economic performance. The increased integration of economies through globalization has made it essential to understand how domestic economic policies, such as monetary and fiscal policies, interact with international economic environments. This paper explores the key concepts and models in open economy macroeconomics, including the Mundell-Fleming model, purchasing power parity, and the dynamics of exchange rate regimes. The study of open economy macroeconomics has gained prominence with the growing interconnectedness of global markets. Unlike a closed economy, where all economic transactions occur within national borders, an open economy engages in trade and financial transactions with other countries. This openness introduces new challenges and opportunities for policymakers, as domestic economic conditions are increasingly influenced by external factors such as foreign exchange rates, international trade agreements, and global capital flows. Open economy macroeconomics seeks to understand how these external factors affect key economic variables, such as output, inflation, and employment.The significance of studying open economy macroeconomics lies in its profound implications for both national and global economic stability and growth. As economies become increasingly interconnected, understanding the mechanisms by which international trade, capital flows, and exchange rates influence domestic economies is essential for effective policymaking. This field of study is particularly relevant in today’s world, where financial crises, trade wars, and global economic shocks can have ripple effects across borders, impacting nations' economic well-being regardless of their size or level of development.. Free Trade Agreements, Currency Pegging, Capital Controls, Trade Tariffs, Exchange Rate Floating. GDP Growth Rate (%),Trade Balance (Billion $), Inflation Rate (%),Unemployment Rate (%). The results indicate that Free Trade Agreements achieved the highest rank, while Capital Controls had the lowest rank being attained. The value of the dataset for Corporate Open Economy Macroeconomics according to the topsis Method, Integrated Pest Management achieves the highest ranking.