ABSTRACT
This chapter offers a reconsideration of the compensation thesis and of the cambist view. The origins and the mechanisms of the compensation thesis, based on a demand-led theory of endogenous money, are recalled, namely the claim that external surpluses (deficits) do not lead to rising (falling) amounts of central bank money. The concerns that have been raised recently about the compensation thesis are also discussed. The cambist view – so-called because the view originates from the dealers themselves – on the determination of the forward exchange rate is then presented, and an assessment of relatively recent apparent deviations from the covered interest parity condition is then being offered. The main inference of the chapter is that post-Keynesians ought to integrate the compensation thesis and the cambist view in their work on international finance.
