A Synthesis of Keynesian, Monetary, and Portfolio Approaches to FlexibleExchange Rates

This paper presents a simple synthesis of Keynesian, monetary, and portfolio approaches to macroeconomic theory under flexible exchange rates. By including the key features of all the partial approaches in a general model, we show that some of the important contrasts that have been drawn between the approaches are due to a neglect of repercussions elsewhere in the economy. After reconciling these false contrasts, we show how some of the approaches still give different predictions about the effects of monetary and fiscal policy using differing assumptions about the international mobility of goods and financial assets.