POL208Y1 Chapter Notes -Rational Agent, Currency War, Hegemony
Document Summary
Countries that are faced with balance-of-payment problems or high levels of foreign currency debt can choose to adjust internally by reducing price or adjust externally with beggar-thy- neighbor policies, through the devaluation of their currency. External adjustment places the consequences of currency devaluation on their trade partners. In order to understanding states choose to adjust either internally or externally , it is essential to examine the states domestic political and social characteristics and external opportunities or constrains . The game theory offers a basic foundation for understanding the rational calculations of a states policy choices and the international environment that will either foster or impend cooperation among nations. The logic of the presoner"s dilemma accordingly requires an accurate assumption about the nature of the game , which is dependent on correctly assessing the implications of rational actor; preference, interests and strategic choices based on domestic and external factors.
