The economics of indeterminacy in overlapping generations models |
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| Affiliation: | 1. São Paulo School of Economics-FGV, Brazil;2. Michigan State University, Department of Economics, United States;1. Sao Paulo School of Economics - FGV, Brazil;2. Michigan State University, Department of Economics, United States;1. University of California, Irvine, United States;2. Northwestern University, United States;1. Washington University in Saint Louis and Federal Reserve Bank of Saint Louis, United States of America;2. Universidad Carlos III de Madrid, Department of Economics, Calle Madrid, 126, Getafe, 28903, Spain;1. Michigan State University, United States of America;2. Sao Paulo School of Economics – FGV, Brazil;3. University of Bristol, United Kingdom of Great Britain and Northern Ireland |
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| Abstract: | Recent research indicates that there are robust examples of overlapping generations economies in which there are indeterminate equilibria without fiat money and equilibria with more than one dimension of indeterminacy. This paper presents simple examples of a stationary, pure exchange overlapping generations economy with one good in each period and a representative consumer, who lives for three periods, in each generation. These examples exhibit every possible form of indeterminacy and instability. Furthermore, the parameters of the principal example agree with empirical evidence. We use our examples as case studies for analyzing the problems involved in computing the equilibria of such economies. |
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