The Political Economy of International Money and Finance

Abstract

Political economy tries to explain the conduct of economic policy. There are two approaches. One is to assume that economic policy makers want to maximize a — somehow defined — welfare function of their people. This is the public interest view of government. It treats nations as the basic decision units. The other approach is the public choice perspective. It assumes that economic policy makers can, and often do, act against the public interest. It tries to explain economic policy by their personal preferences and restrictions. Since policy makers always claim to be guided by the public interest, the public choice approach is inherently critical and distrustful. Since policy makers try to justify their actions with normative economic theories, the public choice theorist faces a double task: he must show that these normative arguments are false or inapplicable, and he must present his own alternative explanation.KeywordsPublic ChoiceDebt CrisisDebtor GovernmentMonetary EconomicCurrent Account BalanceThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.