Ramanan — The Cambridge Political Economy Society Digital Archive

I came across the CPES digital archive today. It has scans of papers which aren’t available elsewhere.

There’s an interesting article Causes Of Growth And Recession In World Trade, there by Francis Cripps, in which he describes the Cambridge Keynesian idea of achieving balanced trade, because nations face a balance-of-payments constraint:

The Case for Concerted Action
The Cambridge Political Economy Society Digital Archive
V. Ramanan

Daniela Gabor — MMT Meets Rey’s Dilemma: A Balance Sheet View Of Capital Flight (Coming Soon To An Em Country Near You)

Recently, a colleague emailed with the following set of questions: ‘a balance sheet approach to defending currencies. Do you know literature that explains in detail the globally interlocking balance sheets between central banks, commercial banks and what happens when a national government has to defend its currency? What is the role of national and foreign reserves and how do they travel these balance sheets in the process of trying to defend a currency? I came back to this question when discussing the Swedish fight to defend the Dollar-pegged Krona in the early 90s and the promise of MMT? Most particularly we wondered to what extent national governments can just issue Krona and use them to buy foreign reserves or what sets the limits exactly to this attempt?' 

My MMT friends do have answers to these questions (and they do spend a lot of time defending MMT from critiques that it doesnt consider balance of payment constraints to monetary sovereignty). I thought I would answer these questions a la Minsky, with balance sheets, since that’s how I teach my undegrad students about exchange rate management in emerging/developing countries. I teach by setting those questions within the broader conversations about global liquidity, global financial cycles and Rey’s dilemma – independent monetary policy is only possible if countries manage capital flows (capital controls)....

Critical Macro Finance

MMT Meets Rey’s Dilemma: A Balance Sheet View Of Capital Flight (Coming Soon To An Em Country Near You)
Daniela Gabor | Professor of Economics and Macro-Finance, University of West England Bristol

Lord Keynes — Thirlwall’s Law: An Overview and Bibliography

Backgrounder and reference. 

Social Democracy For The 21St Century: A Post Keynesian Perspective
Thirlwall’s Law: An Overview and Bibliography
Lord Keynes

Matias Vernengo — Overdose of heterodoxy, failed Keynesian policies or same old balance of payments constraint

Ricardo Hausmann blames the situation in Venezuela to excessive heterodox policies. The piece is not particularly well written, but if you look for the deep cause of the crisis, according to Hausmann, then you must conclude that it is a fiscal one. The government spent too much, and got into too much debt.…

So fiscal problems, too much spending and borrowing, too much money printing, which caused inflation and the currency crisis (the black market gap between the official and parallel value of the domestic currency). As I have discussed in many posts (too many to link) and in a recent paper causality is upside down.…

Naked Keynesianism
Overdose of heterodoxy, failed Keynesian policies or same old balance of payments constraint
Matias Vernengo | Associate Professor of Economics, Bucknell University

Frances Coppola — Understanding balance of payments crises in a fiat currency system

Frances appends a note to her post:

As I don't wish to get caught up in arguments about whether governments do or don't create money when they spend, I am preserving the fiction of central bank and government separation. This means that the language in this post is that of monetarism, rather than MMT. I do not apologise for this: it is my firm belief that MMT and market monetarism are brothers under the skin, and the differences between them are largely semantic. Though there might be a difference in political ideology too.

Coppola Comment
Understanding balance of payments crises in a fiat currency system
Frances Coppola

Brian Romanchuk — Growth Limits (Again)

Brian comments on Ramanan

Bond Economics
Growth Limits (Again)
Brian Romanchuk

Bill Mitchell — Balance of payments constraints

The late Canadian economist Harry Johnson, who came at the subject from the Monetarist persuasion, was correct when he wrote in 1969 (reference below) that “The adoption of flexible exchange rates would have the great advantage of freeing governments to use their instruments of domestic policy for the pursuit of domestic objectives, while at the same time removing the pressures to intervene in international trade and payments for balance-of-payments reasons.” How does this square with those who believe that even currency-issuing governments are constrained in their fiscal flexibility by an alleged balance of payments constraint. So-called progressive economists, particularly, are enamoured with the idea that Modern Monetary Theory (MMT) is flawed because it doesn’t recognise the fiscal limits imposed by the need to maintain a stable external balance. In this blog, we trace the arguments.…

The post everyone has been waiting for.

Bill Mitchell – billy blog
Balance of payments constraints
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Ramanan responded in the comments here at MNE and developed his argument in a separate post. With "free trade" to the fore these days owing to the flurry of new trade agreements, this is a debate worth having.

The Case for Concerted Action
Neochartalism, Balance Of Payments And Mainstream Economics
V. Ramanan

My view is that there is a political dimension to trade as well as an economic one. Economics focuses in efficiencies such as comparative advantage. But from the political point of view, as well as engineering, efficiency about means and effectiveness is about goals. Efficiency serves effectiveness. This means that efficiency must be balanced with resilience.

A balance must be struck between autarchy and dependence, for example. In addition, history testifies that more growth of developed countries is benefitted by so-called free trade, whereas the growth of emerging countries has been enhanced by protecting infant industries. This was the case between Britain and the US in the 19th century, for example.