Balance of payments and determinacy

In economies of overlapping generations, competitive equilibrium allocations and interest rates may be indeterminate. In a world economy with multiple countries, a competitive equilibrium need not satisfy the condition that the balance of payments be in equilibrium. In a stationary economy with heterogeneous countries, the requirement that, in addition to market clearing, a balance of payments equilibrium condition be satisfied restores the determinacy of equilibrium; and it may select the monetary steady - state equilibrium.