On the Indeterminacy of Equilibrium Exchange Rates
John Kareken and
The Quarterly Journal of Economics, 1981, vol. 96, issue 2, 207-222
In this paper we consider a particular international economic policy regime: the laissez-faire regime, the distinguishing features of which are unrestricted portfolio choice and floating exchange rates. And as we show, this regime, although favored by many economists, is not economically feasible. It does not have a determinate equilibrium. That is an implication of an overlapping-generations model. More basically, it is an implication of the notion that money is wanted only in order to accomplish trades.
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Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:96:y:1981:i:2:p:207-222.
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