ABSTRACT

Open economy politics (OEP) looks to the preferences of individuals to explain patterns of international monetary politics. It begins with the macroeconomic trilemma, which holds that states cannot simultaneously maintain fixed exchange rates, capital controls, and autonomous monetary policies. In a financially integrated world, this choice is narrowed to a distribution-laden tradeoff between currency stability and monetary policy flexibility. Individuals recognize their changing stakes in currency decisions in a globalizing world, and lobby policymakers to enact policies which will advance their interests. This chapter provides an analytic overview of the OEP approach and assesses progress in the monetary literature within the context of an ongoing dialogue between OEP critics and practitioners. Emerging research reveals that OEP scholars have creatively modified their empirical strategies to answer external criticisms. Progress has come at the cost of declining paradigmatic coherence, however, as core OEP assumptions are increasingly relaxed and abandoned.