Profit Squeeze, Rentier Squeeze, and Macroeconomic Policy under Fixed and Flexible Exchange Rates

It has become increasingly apparent that international economic arrangements, and particularly international financial integration, are critical determinants of macroeconomic outcomes. In this chapter I develop a model and present empirical results which identify several ways in which two major institutional features of so-called ‘Open Economy Macroeconomics’ — the nature of the exchange rate regime and the degree of international capital mobility — influence the choice of macroeconomic policy and the effects of that policy on corporate profits.