ABSTRACT
The contractionary devaluation debate (CDD) concerns the impact of exchange rate devaluations on LDC economies. Exchange rate devaluations are recommended by the IMF for countries that are unable to meet their foreign exchange payments obligations, a situation often termed as a Balance of Payments (BOP) crisis. New Structuralists have charged that these devaluations cause stagflation. In order to examine the ontological bases for the arguments of the two sides of the CDD (examined in detail in chapter 5), this chapter examines their theories of the exchange rate and international markets. The chapter builds on the general exposition of structuralist and individualist ontologies in development economics presented in chapters 2 and 3, and focuses on one key market in the economy: the market for foreign exchange.
