Abstract
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.
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Notes and References
R. F. Harrod, Money (London: Macmillan, 1969) p. 151.
R. F. Harrod, The Life of John Maynard Keynes (London: Macmillan, 1951) p. 403.
P. Davidson, Money and the Real World, p. 409; Cf. J. R. Hicks, Critical Essays in Monetary Theory (Oxford University Press, 1967) p. 36.
Cf. J. R. Hicks, Value and Capital, 2nd ed. (Oxford University Press, 1946) p. 255. Also see pp. 205–6, 250–2, 264–6.
See S. Weintraub, ‘Flexible Exchange Rates’, Journal of Post Keynesian Economics, 3, Summer 1981.
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.
M. Friedman, ‘The Case for Flexible Exchange Rates’, in M. Friedman, Essays in Positive Economics (University of Chicago Press, 1953) p. 200.
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© 1982 Paul Davidson
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Davidson, P. (1982). International Money and Liquidity. In: International Money and the Real World. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-16679-4_6
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DOI: https://doi.org/10.1007/978-1-349-16679-4_6
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