Stationary Markov Equilibria in an OLG Model with Correlated Production Shocks
AbstractIn this paper, the author examines the existence of stationary equilibria in an overlapping generations model where production shocks are correlated over time. In general, the system is complicated by dynamic indeterminacy and possibility of sunspot equilibria. However, there exists a time-homogeneous Markov process of the state variable that represents a nonsunspot dynamic equilibrium. The long-run analysis establishes a sufficient condition for the existence of a nontrivial stationary equilibrium. Moreover, it is shown that the conventional restrictions on the production function are not sufficient to prevent the economy from converging to zero production and consumption. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 35 (1994)
Issue (Month): 3 (August)
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- Takeoka, Norio, 2006. "Stationary Markov equilibria on a non-compact self-justified set," Journal of Mathematical Economics, Elsevier, vol. 42(3), pages 269-290, June.
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- Takeoka, Norio, 2003. "On the consistency of stationary Markov equilibria with an exogenous distribution," Journal of Economic Theory, Elsevier, vol. 113(2), pages 316-324, December.
- Costas Xiouros, 2006. "Asset price volatilities and trading volumes in heterogeneous agent economies," Computing in Economics and Finance 2006, Society for Computational Economics 466, Society for Computational Economics.
- Kevin Reffett & Olivier Morand, 2008. "Isotone recursive methods for Stationary Markov Equilibra in OLG models with stochastic nonclassical production," 2008 Meeting Papers 470, Society for Economic Dynamics.
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