Resurrecting equilibria through cycles in an overlapping generations model of money
AbstractMomentary equilibria are defined as points that satisfy agents' optimality conditions and market clearing at any date. However, some dynamic sequences commencing from such points may not be considered valid equilibria because they asymptotically violate some economic restriction of the model. This paper studies a pure-exchange monetary overlapping generations economy in which young and old agents face exogenous minimum consumption requirements, and money is the only asset. The presence of the minimum consumption requirement on the old is shown to produce multiperiodic monetary equilibria in which real balances cycle forever between "momentary" equilibrium points (those which generate monetary sequences that potentially violate equilibrium strictures asymptotically). The novelty is to show that segments of the intergenerational offer curve that would have been deemed dynamically invalid can, in fact, be used to produce asymptotically valid cyclical paths. Indeed, a limit cycle can bestow dynamic validity on momentary equilibrium points that had erstwhile been classified as dynamically invalid.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Macroeconomics.
Volume (Year): 32 (2010)
Issue (Month): 2 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622617
Monetary equilibria Cycles Minimum consumption requirements;
Other versions of this item:
- Barnett, Richard C. & Bhattacharya, Joydeep & Bunzel, Helle, 2010. "Resurrecting Equilibria Through Cycles in an Overlapping Generations Model of Money," Staff General Research Papers 32099, Iowa State University, Department of Economics.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Satyajit Chatterjee & B. Ravikumar & B. Ravikumar, 1997.
"Minimum consumptions requirements: theoretical and quantitative implications for growth and distribution,"
97-15, Federal Reserve Bank of Philadelphia.
- Chatterjee, Satyajit & Ravikumar, B., 1999. "Minimum Consumption Requirements: Theoretical And Quantitative Implications For Growth And Distribution," Macroeconomic Dynamics, Cambridge University Press, vol. 3(04), pages 482-505, December.
- Chatterjee, S. & Ravikumar, B., 1997. "Minimum Consumption Requirements: Theoretical and Quantitative Implications for Growth and Distribution," Working Papers 97-15, University of Iowa, Department of Economics.
- Michele Boldrin & Michael Woodford, 1988.
"Equilibruim Models Displaying Endogenous Fluctuations and Chaos: A Survey,"
UCLA Economics Working Papers
530, UCLA Department of Economics.
- Boldrin, Michele & Woodford, Michael, 1990. "Equilibrium models displaying endogenous fluctuations and chaos : A survey," Journal of Monetary Economics, Elsevier, vol. 25(2), pages 189-222, March.
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834.
- Luís Aguiar-Conraria & Karl Shell, 2006.
International Journal of Economic Theory,
The International Society for Economic Theory, vol. 2(3-4), pages 331-349.
- Luca Bossi & Pere Gomis-Porqueras, 2008.
"Consequences of Modeling Habit Persistence,"
0701, University of Miami, Department of Economics.
- Bunzel, Helle, 2006.
"Habit persistence, money, and overlapping generations,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 30(12), pages 2425-2445, December.
- Bunzel, Helle, 2006. "Habit Persistence, Money, and Overlapping Generations," Staff General Research Papers 12405, Iowa State University, Department of Economics.
- Bullard, James & Duffy, John, 1998. "Learning And The Stability Of Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 2(01), pages 22-48, March.
- Amartya Lahiri & Mikko Puhakka, 1996.
"Habit Persistence in Overlapping Generations Economies Under Pure Exchange,"
UCLA Economics Working Papers
754, UCLA Department of Economics.
- Lahiri, Amartya & Puhakka, Mikko, 1998. "Habit Persistence in Overlapping Generations Economies under Pure Exchange," Journal of Economic Theory, Elsevier, vol. 78(1), pages 176-186, January.
- Grandmont, Jean-Michel, 1985.
"On Endogenous Competitive Business Cycles,"
Econometric Society, vol. 53(5), pages 995-1045, September.
- Barnett, Richard C. & Bhattacharya, Joydeep & Bunzel, Helle, 2013.
"Deviant Generations, Ricardian Equivalence, and Growth Cycles,"
Staff General Research Papers
12939, Iowa State University, Department of Economics.
- Richard Barnett & Joydeep Bhattacharya & Helle Bunzel, 2013. "Deviant generations, Ricardian equivalence, and growth cycles," Economic Theory, Springer, vol. 52(1), pages 367-396, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.