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 InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 325.
Date of creation: 1987
Date of revision:
Publication status: Published in Journal of Economic Theory (Vol. 45, No. 1, June 1988, pp. 102-127)
Other versions of this item:
- Rao Aiyagari, S., 1988. "Nonmonetary steady states in stationary overlapping generations models with long lived agents and discounting: Multiplicity, optimality, and consumption smoothing," Journal of Economic Theory, Elsevier, vol. 45(1), pages 102-127, June.
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