Recent Developments in Open Economy Macroeconomics

The convening of this conference is a welcome sign that Indian economists, like their peers in other countries, are becoming increasingly conscious of the benefits that a country can gain by integrating itself into the global economy. These benefits are primarily microeconomic: they permit an economy to achieve output of greater value from a given set of inputs. They may also permit the inputs to grow more rapidly, if export-led growth overcomes the foreign exchange constraint. On the other hand, integration into the world economy does make an economy more exposed to global shocks, and coping with these accentuates the challenge to macroeconomic plicymakers.