POLI 243 Lecture Notes - Exchange Rate
Document Summary
Key currencies, the exchange rate, and domestic politics. Easy way to solve your balance of payments. United states hasn"t been selling as many goods as they have been purchasing, and therefore has been compensating it through payment with their us currency because it is valued: impetus for outward foreign investment. Economic models identify array of domestic interests (defining the dominant cleavage) . State pursues preferences international politics as states interact. Competing notions about the dominant interest: hard money or soft: creditors or debtors. Import consuming or not: middle vs. lower class. A declining exchange rate makes it hard to purchase from abroad. A high exchange rate makes it easier to purchase from abroad. Ability to pass along costs: commodity producers vs. producers of complex goods (style, quality) Bureaucratic politics: ministry of finance vs. the central bank: lobbying groups to compete to influence the government.