On the indeterminacy of equilibrium exchange rates

John Kareken, Neil Wallace

Research output: Contribution to journalArticlepeer-review

174 Scopus citations


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
Issue number2
StatePublished - May 1981

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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