Optimality in stochastic OLG models: Theory for tests |
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Authors: | Subir Chattopadhyay |
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Institution: | aCentro de Estudios Económicos, El Colegio de México, México D. F. 10740, México;bDepartamento de Fundamentos del Análisis Económico, Universidad de Alicante, E-03071 Alicante, Spain |
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Abstract: | We consider general OLG economies under uncertainty, with short maturity assets and with dividend paying assets of infinite maturity and fiat money, and study the optimality properties of equilibria with a sequence of asset markets that are sequentially complete. We provide necessary and sufficient conditions, in terms of asset prices and dividends, for equilibria to be conditionally Pareto optimal. These results provide a theoretical basis for empirical investigation. |
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Keywords: | Stochastic overlapping generations models Optimality characterization Empirical tests Asset markets |
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