uld happen if, say, Britain (which we shall identify with country 1) adopted a sliding parity system while a subset of other countries (2, . . ., j) allowed their exchange rates to float, and the remaining countries, k, . . ., n, kept their rates pegged to, say, the U.S. dollar (the currency of country 0). Then, if we suppose that balances of payments of countries whose rates float adjust instantaneously while the pound adjusts slowly, the path of the pound over time would be
for which knowledge of the Hicks conditions would be directly relevant. Thus the particular form of the dynamic system adopted -which countries are left out and which are left in- would depend on which of the Hicks conditions are satisfied. The Hicks method does, therefore, have a role to play in dynamic aspects of the theory of economic policy.
The Hicks conditions, however, are not exactly what we need for the theory of economic policy, because, as we shall see, they are incomplete even in terms of Hicks' own method. In the experiments Hicks conducts to derive his stability conditions he accords the numéraire -the standard commodity- a special role. In this section we shall consider the precise deficiencies in the statical information provided by the Hicks conditions. This is best established by considering the comparative statics theorems implied by the Hicks conditions. Consider the equilibrium system
where, again, the Bi's are balances of payments, the p's are exchange rates, and alpha is a parameter.
Differentiation of (11) with respect to alpha yields
and the solutions for the exchange-rate changes are
Now consider an increase in demand for the currency of country i such that deltaBi / delta alpha > 0; while the excess demand for every other currency, at given exchange rates, is unchanged (deltaBj / delta alpha = 0 for i not= j). Then, instead of (13), we have simply
By the Hicks conditions of imperfect stability Deltaii /Delta < 0, so deltaBi / delta alpha > 0 implies dpi / d alpha > 0. Thus an increase in demand for the currency of 