On the indeterminacy of equilibrium exchange rates

John Kareken, Neil Wallace

Research output: Contribution to journalArticle

149 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)207-222
Number of pages16
JournalQuarterly Journal of Economics
Volume96
Issue number2
DOIs
StatePublished - Jan 1 1981

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Equilibrium exchange rate
Indeterminacy of equilibrium
Economic policy
International economics
Economists
Overlapping generations model
Floating exchange rates
Portfolio choice
Laissez-faire

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

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On the indeterminacy of equilibrium exchange rates. / Kareken, John; Wallace, Neil.

In: Quarterly Journal of Economics, Vol. 96, No. 2, 01.01.1981, p. 207-222.

Research output: Contribution to journalArticle

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