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Existence and calculation of optimal monetary equilibria on overlapping generations economies

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  • Dognini, Leandro Lyra Braga

Abstract

A well-known feature of overlapping generations economies is that the First Welfare Theorem fails and equilibrium may be inefficient. The Cass (1972) criterion furnishes a necessary and sufficient condition for efficiency, but it does not address the existence of efficient equilibria, and Cass, Okuno, and Zilcha (1979) provide nonexistence examples. A closely related question (known as the Hahn (1965) problem) deals with the existence of monetary equilibria. In this paper, I provide sufficient conditions for the existence of optimal monetary equilibria on consumption-loan, non-stationary overlapping generations economies without durable, dividend-paying assets, cash-in-advance constraints, wealth-transfer mechanisms, or transaction costs. Essentially, the economy must be prone to savings. Furthermore, I develop an algorithm to find these optimal monetary equilibria as the limit of nested compact sets. These compact sets are the result of a backward calculation through equilibrium equations departing from the set of optimal monetary equilibria of well-behaved tail economies.

Suggested Citation

  • Dognini, Leandro Lyra Braga, 2026. "Existence and calculation of optimal monetary equilibria on overlapping generations economies," Journal of Mathematical Economics, Elsevier, vol. 125(C).
    • Handle: RePEc:eee:mateco:v:125:y:2026:i:c:s0304406826000431
    DOI: 10.1016/j.jmateco.2026.103255
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    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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