Macroeconomic impacts of globalization

Abstract

Globalization has led to substantial changes to the economies of many nations. The contemporary form of globalization has substantially increased the degree of openness of most economies, both in terms of international capital flows and in trade, and it represents an almost overwhelming force impacting on all countries. This paper considers some of the implications of the macroeconomic impact of globalization on nation states within an explicitly Keynesian/Kaleckian framework. Two interrelated forms of macroeconomic impact are considered. Initially, the general implications of globalization for the output and growth of national economies are examined, before turning to the constraints imposed on the ability of governments to influence the macro-economy via traditional polices. With floating exchange rates, high capital mobility may render expansionary fiscal and monetary policy ineffective (or even counterproductive) … Internationalization will undermine the autonomy and efficiency of government macroeconomic policy. (Milner and Keohane, 1996, p. 18).