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international political economy

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With reference to Susan Strange and Immanual Wallerstein define international political economy. Please in detail.

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International political economy refers to the study of international relations in combination with political economy. It is the combination of political science and economics. It broadens the economic approach to include factors such as culture and power into the analysis. It also includes comparative politics and institutional approaches to politics. Topics of study include state failure, the effects of globalization on domestic politics, and how politics affects domestic stability.

Susan Strange offered an approach to international political economy based on three themes. First, she argued that too much time was spent studying the violent interactions of states. In other words, political science spent too much time on wars and not enough on other factors. In particular, she emphasized the role of international financial markets.

Second, she challenged the appropriateness of liberal political and economic theory. Much of mainstream rational choice models focus only the incentives that individuals face in making decisions. In most cases, the incentives are monetary rewards and penalties. Prof. Strange wished ...

Solution Summary

Describe international political economy.

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The rise of the Euro and the fall of the USD; Could the Euro replace the US Dollar?


The U.S. Dollar has been a very popular currency to hold worldwide as it has had a reputation for being stable and is accepted in exchange for goods and services in most corners of the globe. However, on January 1st, 1999 the European Union introduced the Euro, which has been accepted as the main currency in a growing number of European countries including Germany, France, Italy, Spain, Greece etc.. As a further challenge to the dominance of the USD China has started pressing to replace the USD as the world's reserve currency with the International Monetary Fund's (IMF) Special Drawing Rights as well as the World Bank's suggestion that the dollar should once again be linked to gold. Lately the Chinese have started proting their own currency too.

Is the exchange rate (the dollar price of the Euro) determined by a fixed or a floating exchange rate system? Is the exchange rate of the Mexican peso in terms of Euro determined in a fixed or in a floating exchange rate system? What about the IMF's Special Drawing Rights: How is their value determined? What about the large amount of money being printed by the Federal Reserve and the huge deficits being created by the US administration? What about the deficit/debt problems of the "Club Med" countries and the effect these problems are having on the value of the euro?


Will the Euro and/or the IMF's Special Drawing Rights or a gold linked dollar or a select basket of currencies replace the US Dollar as the world's most popular currency to hold? Consider the implications being introduced by the debt problems in Europe on the exchange rates between the U.S. dollar, the euro and the other major world currencies.

Assignment Expectations:

A paper detailing why the US dollar might be replaced as the world's reserve currency by the Euro or the IMF's Special Drawing Rights.

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