This dissertation attempts to integrate a wide range of macro-disequilibrium models into devaluation theory in order to reexamine macroeconomic policies in a small open economy. The importable goods market disequilibrium and the exportable goods market disequilibrium are first treated. Next, the treatment is extended to an overall market disequilibrium. Moreover, in Appendices A, B, and C separable-spillover and loanable funds market disequilibrium are also considered. The findings of the study illustrate that devaluation may be seriously influenced by disequilibrium forces such that the traditionally definite effect cannot be assured. In general, the effects of devaluation on the trade balance, employment, and the composition of output vary widely according to which classification the economy belongs to – i.e., the classical unemployment type, the Keynesian unemployment type, or the repressed inflation type. The findings imply that when a country attempts to construct macroeconomic stabilization policies, it should first analyze its economic situation. After initial, careful consideration, successful prescriptions may be devised.
