ABSTRACT
From the Review of Economic Studies, vol. 17 (1949–50), pp. 159–167. Meade described the origin of this paper:
‘This note is a by-product of work which I am doing under the auspices of the Royal Institute of International Affairs on The Theory of International Economic Policy [Vol. I: The Balance of Payments (London: Oxford University Press, 1951)]. In order to deal with the influence of speculation in the foreign exchange market it was necessary to analyse speculative forces on these lines. The analysis is in many respects merely an elaboration of the ideas on speculation put forward by A. P. Lerner in his Economics of Control [New York: The Macmillan Company, 1944]. The argument in this note and the proofs in the Appendix owe their present form to Professor A. Henderson and Mr Lomax, of Manchester University. I had attempted to establish my propositions by a geometric treatment which Professor Henderson pointed out to me to be unconvincing. I owe the more rigorous proofs to his intervention, aided by Mr Lomax’s mathematics.’
