Nonmonetary steady states in stationary overlapping generations models with long lived agents and discounting: Multiplicity, optimality, and consumption smoothing
AbstractWe construct a sequence of pure exchange, stationary OLG economies in which generations have longer and longer life spans and all agents maximize a discounted sum of utilities with a fixed, positive, and common discount rate. Period utility functions and endowment patterns are subject to mild restrictions and within generation heterogeneity is permitted. We show that: (i) Every sequence of equilibrium interest rates converges to the discount rate. (ii) Eventually every nonmonetary steady state is optimal and a monetary steady state will never exist. (iii) For any agent consumption at any fixed age converges to permanent income evaluated using the utility discount rate.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 45 (1988)
Issue (Month): 1 (June)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- S. Rao Aiyagari, 1987. "Nonmonetary steady states in stationary overlapping generations models with long lived agents and discounting: multiplicity, optimality, and consumption smoothing," Working Papers 325, Federal Reserve Bank of Minneapolis.
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