The Political Economy of Exchange Rate Policy-Making

This chapter establishes a theoretical framework for the analysis of exchange rate policy-making. Existing theoretical perspectives on this subject are shown to be problematic, and an alternative means of analysis based on an ‘open Marxist’ methodology is proposed and developed. In essence, this argues that exchange rate policy-making should be seen as a key component of a wider governing strategy that is designed by state managers with a view to containing class struggle, securing favourable conditions for capital accumulation, and providing a sufficient degree of governing autonomy for the pursuit of high political aims. On this basis, the chapter also examines some of the various ways in which alternative exchange rate regimes can be used to achieve these objectives, and explores their relative benefits and disadvantages.