IDEAS home Printed from https://ideas.repec.org/a/eee/jetheo/v67y1995i2p566-577.html
   My bibliography  Save this article

On the Existence of Endogenous Cycles

Author

Listed:
  • Balasko Yves
  • Ghiglino Christian

Abstract

Endogenous business cycles have been known to exist in the overlapping-generations model since quite a long time. The literature seems to imply that these cycles may exist only if individuals show rates of preference for the present that are high enough, and these values have to be so high that they are unrealistic. While this observation is true if preferences are homothetic, we show in this paper that, once the homotheticity requirement is dropped, a sufficient condition for the existence of cycles is that the Engel curve defined for equal prices (therefore taken equal to one) has at least a point where the slope is smaller than one. This condition expresses a mild form of impatience. Given this condition, it is always possible to find a discounted utility function (for any arbitrary given discount rate smaller than one) and positive endowments such that the corresponding overlapping- generations model features cycles of order two.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Balasko Yves & Ghiglino Christian, 1995. "On the Existence of Endogenous Cycles," Journal of Economic Theory, Elsevier, vol. 67(2), pages 566-577, December.
  • Handle: RePEc:eee:jetheo:v:67:y:1995:i:2:p:566-577
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022-0531(85)71086-1
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hart, Oliver D & Kreps, David M, 1986. "Price Destabilizing Speculation," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 927-952, October.
    2. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
    3. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    4. Grossman, Sanford J & Stiglitz, Joseph E, 1976. "Information and Competitive Price Systems," American Economic Review, American Economic Association, vol. 66(2), pages 246-253, May.
    5. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-678, May.
    6. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    7. Rochet, Jean-Charles. & Vila, Jean-Luc., 1991. "Insider trading and market manipulations--existence and uniqueness of equilibrium," Working papers 3318-91., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    8. Sanford J. Grossman, 1977. "The Existence of Futures Markets, Noisy Rational Expectations and Informational Externalities," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 431-449.
    9. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
    10. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
    11. Ausubel, Lawrence M., 1990. "Partially-revealing rational expectations equilibrium in a competitive economy," Journal of Economic Theory, Elsevier, vol. 50(1), pages 93-126, February.
    12. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    13. Ausubel, Lawrence M, 1990. "Insider Trading in a Rational Expectations Economy," American Economic Review, American Economic Association, vol. 80(5), pages 1022-1041, December.
    14. Diamond, Douglas W. & Verrecchia, Robert E., 1981. "Information aggregation in a noisy rational expectations economy," Journal of Financial Economics, Elsevier, vol. 9(3), pages 221-235, September.
    15. Anderson, Robert M. & Sonnenschein, Hugo, 1982. "On the existence of rational expectations equilibrium," Journal of Economic Theory, Elsevier, vol. 26(2), pages 261-278, April.
    16. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gomes, Orlando, 2007. "Time preference and cyclical endogenous growth," MPRA Paper 3282, University Library of Munich, Germany.
    2. Davila, Julio, 2001. "Time and Uncertainty in Overlapping Generations Economies," Journal of Economic Theory, Elsevier, vol. 100(2), pages 356-386, October.
    3. Orlando Gomes, 2008. "Time Preference and Cyclical Endogenous Growth in an AK Growth Model," Notas Económicas, Faculty of Economics, University of Coimbra, issue 28, pages 32-55, December.
    4. Jan Tuinstra & Claus Weddepohl, 1999. "On the equivalence between the overlapping-generations model and cyclical general-equilibrium models," Journal of Economics, Springer, vol. 70(2), pages 187-207, June.
    5. Julio Dávila, "undated". "Reducing Overlapping Generations Economies to Finite Economies," Penn CARESS Working Papers 9819996a2b80f99a81bf1509c, Penn Economics Department.
    6. Balasko, Yves, 2003. "Economies with price-dependent preferences," Journal of Economic Theory, Elsevier, vol. 109(2), pages 333-359, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:67:y:1995:i:2:p:566-577. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.