Balance of payments and determinacy

Heracles Polemarchakis and Matteo Salto
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Heracles Polemarchakis: CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium

No 1995084, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In economies of overlapping generations, competitive equilibrium allocations and interest rates may be indeterminate. In a world economy with multiple countries, a competitive equilibrium need not satisfy the condition that the balance of payments be in equilibrium. In a stationary economy with heterogeneous countries, the requirement that, in addition to market clearing, a balance of payments equilibrium condition be satisfied restores the determinacy of equilibrium; and it may select the monetary steady - state equilibrium.

Keywords: balance of payments; determinacy of competitive equilibrium (search for similar items in EconPapers)
JEL-codes: D50 F41 (search for similar items in EconPapers)
Date: 1995-12-01
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