International Money and Liquidity

  • Paul Davidson


The fundamental question for monetary theory is: Why do people hold money which is barren, rather than interest bearing securities or productive physical goods? The answer must involve uncertainty about the future and the inability to precisely coordinate cash inflows with contractual cash outflow commitments.


Exchange Rate Central Bank Money Supply Foreign Currency Foreign Exchange Market 
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Notes and References

  1. 1.
    R. F. Harrod, Money (London: Macmillan, 1969) p. 151.CrossRefGoogle Scholar
  2. 3.
    R. F. Harrod, The Life of John Maynard Keynes (London: Macmillan, 1951) p. 403.Google Scholar
  3. 6.
    P. Davidson, Money and the Real World, p. 409; Cf. J. R. Hicks, Critical Essays in Monetary Theory (Oxford University Press, 1967) p. 36.Google Scholar
  4. 8.
    Cf. J. R. Hicks, Value and Capital, 2nd ed. (Oxford University Press, 1946) p. 255. Also see pp. 205–6, 250–2, 264–6.Google Scholar
  5. 9.
    See S. Weintraub, ‘Flexible Exchange Rates’, Journal of Post Keynesian Economics, 3, Summer 1981.Google Scholar
  6. 10.
    The possibility of bankruptcy however creates discontinuities which endanger all existence proofs of general equilibrium. Thus if a bankruptcy occurs, no general equilibrium may exist. See K. Arrow and F. Hahn, General Competitive Analysis (San Francisco: Holden-Day, 1971) pp. 355–61.Google Scholar
  7. 19.
    M. Friedman, ‘The Case for Flexible Exchange Rates’, in M. Friedman, Essays in Positive Economics (University of Chicago Press, 1953) p. 200.Google Scholar

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© Paul Davidson 1982

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  • Paul Davidson

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