We study the properties of two-period monetary cycles in simple pure exchange overlapping generations economies in which the households live for three periods. We demonstrate that these economies can support cycles under a much broader -- and, arguably, more plausible -- range of assumptions than the analogous two-period economies. We show that economies that fail the well-known Grandmont [1985] condition can have cycles, and that economies that satisfy the condition can fail to have cycles. In addition, we show that economies can have monetary cycles when they do not have conventional monetary steady states, and when aggregate demand for assets is not decreasing in the real return rate at a gross real rate of unity.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
10250.
Length: Date of creation: 27 Mar 2003 Date of revision: Publication status: Published in Journal of Economic Theory, 2003, Vol. 109 , No. 2, pp. 378-401. Handle: RePEc:isu:genres:10250
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