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Business Cycle Phenomena in Overlapping Generations Economies with Stochastic Production

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  • Jens-Ulrich Peter
  • Klaus Reiner Schenk-Hoppé

Abstract

This paper analyzes economic fluctuations in an overlapping generations economy with productive capital in which random shocks in aggregate productivity are present. Under specific assumptions we obtain an explicit solution of the model. Applying random dynamical systems theory, we can prove that the long-run behavior of the economy is uniquely described by an asymptotically stable random fixed point. The statistical properties of the aggregates output, consumption, capital stock, and real wage are investigated numerically. find that our artificial economy displays several real world business cycle phenomena.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 030.

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Handle: RePEc:zur:iewwpx:030

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Keywords: : overlapping generations; real business cycles; technology shocks; random dynamical systems; random fixed point;

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  1. Bruno S. Frey & Lorenz Goette, . "Does Pay Motivate Volunteers?," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 007, Institute for Empirical Research in Economics - University of Zurich.
  2. Bruno S. Frey & Reto Jegen, 2000. "Motivation Crowding Theory: A Survey of Empirical Evidence," CESifo Working Paper Series 245, CESifo Group Munich.
  3. Armin Falk & Ernst Fehr & Urs Fischbacher, 2003. "On the Nature of Fair Behavior," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 41(1), pages 20-26, January.
  4. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 817-868, August.
  5. Bruno S. Frey & Alois Stutzer, . "Happiness, Economy and Institutions," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 015, Institute for Empirical Research in Economics - University of Zurich.
  6. Josef Falkinger & Ernst Fehr & Simon Gaechter, . "A Simple Mechanism for the Efficient Provision of Public Goods - Experimental Evidence," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 003, Institute for Empirical Research in Economics - University of Zurich.
  7. Bruno S. Frey & Marcel Kucher & Alois Stutzer, 1999. "Outcome, Process & Power in Direct Democracy," CESifo Working Paper Series 222, CESifo Group Munich.
  8. Bruno S. Frey & Alois Stutzer, 2000. "Maximising Happiness?," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 1(2), pages 145-167, 05.
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