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Myopic and perfect foresight in the OLG model

Author

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  • Michel, Philippe

    (Université de la Méditerranée, IUF; GREQAM, Marseille)

  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

We compare the dynamics under myopic foresight and under perfect foresight in an overlapping generations model with capital accumulation and two-period lived individuals. When the rational dynamics are defined and the myopic dynamics are monotonic, the study of myopic foresight allows to characterize the dynamics under perfect foresight. The study of myopic dynamics also allows to obtain a condition of uniqueness of the steady state that bears only on the second order derivatives of the utility and production functions.

Suggested Citation

  • Michel, Philippe & de la Croix, David, 1999. "Myopic and perfect foresight in the OLG model," LIDAM Discussion Papers IRES 1999014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1999014
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/9914.pdf
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    References listed on IDEAS

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    1. Galor, Oded & Ryder, Harl E., 1989. "Existence, uniqueness, and stability of equilibrium in an overlapping-generations model with productive capital," Journal of Economic Theory, Elsevier, vol. 49(2), pages 360-375, December.
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    More about this item

    Keywords

    perfect foresight; myopic foresight; stability;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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