'Unequal Partners': The Role of International Financial Flows and the Exchange Rate Regime

This paper examines themes central to designing policies to promote growth and development in economies characterized by capital market globalization and integration. Unequal partners include less-developed nations whose most important need is development and middle-income nations whose domestic markets create a competitive disadvantage. Macroeconomic concepts such as domestic monetary policy, financial flows and the choice of exchange rate regime apply to each nation type. Strategies characterized as “monetary mercantilism” are employed historically by nations that have succeeded in achieving stronger economic growth, which contradicts austerity-led policies favored by international bureaucracies.