Trend-reverting fluctuations in the life-cycle model
AbstractAggregate time series provide evidence of short term dynamic adjustment that appears to be governed by complex or negative real eigenvalues. This finding is at odds with the predictions of reasonably parameterized, convex one-sector growth models with complete markets. We study life cycle economies in which aggregate saving depends non-trivially on the distribution of wealth among cohorts. If consumption goods are weak gross substitutes near the steady state price vector, we prove that the unique equilibrium of a life cycle exchange economy converges to the unique non-monetary steady state via damped oscillations. We also discuss examples and extensions. ; Earlier title: Complex Eigenvalues and Trend-Reverting Fluctuations
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 119 (2004)
Issue (Month): 2 (December)
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- Costas Azariadis & James Bullard & Lee Ohanian, 2001. "Trend-reverting fluctuations in the life-cycle model," Working Papers 1998-015, Federal Reserve Bank of St. Louis.
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