Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334004 
Year of Publication: 
2025
Series/Report no.: 
FMM Working Paper No. 119
Publisher: 
Hans-Böckler-Stiftung, Macroeconomic Policy Institute (IMK), Forum for Macroeconomics and Macroeconomic Policies (FMM), Düsseldorf
Abstract: 
The revival of economic nationalism poses a challenge to neoclassical orthodoxy, which claims that liberalized international trade is (subject to a few recognized exceptions) inherently cooperative and mutually beneficial. Post-Keynesian open economy models demonstrate that international trade relations can be conflictive under certain conditions. In the short run, changes in either cost or quality competitiveness can shift output, growth, and employment from some countries to others. In the medium run, positive feedbacks from growth of exports to growth of labor productivity create self-reinforcing gains in external competitiveness for some countries that may come at the expense of losses for others. In the long run, changes in the real exchange rate or terms of trade can favor some countries' growth at the expense of others'. The post-Keynesian approach also implies that coordinated fiscal expansions can mitigate these conflicts and foster more cooperative outcomes, while industrial policies are generally superior to protectionism.
Subjects: 
Economic nationalism
export-led cumulative causation
international conflict
real exchange rate
trade balance
JEL: 
F43
E12
O41
B52
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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