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Alternative Dynamics and Stability Results in a Standard OLG Model. An Interpretation


  • César L. Guerrero-Luchtenberg

    () (División de Economía, CIDE)


In this paper we make a critique of the standard stability results already established in a basic two period OLG model. Under an alternative interpretation (competitive financial markets), we are able to select the test equilibrium in the long run, in such a way that the economy can reach the Golden Rule Steady State, even when at this interest rate, all young agents are creditors. We show that even if the economy starts with only young people —referred to as the Garden of Eden Economy—, it also reaches the Golden Rule Steady State. Additionally, as a by-product of this study, we obtain a complete characterization of the possible equilibria.

Suggested Citation

  • César L. Guerrero-Luchtenberg, 2004. "Alternative Dynamics and Stability Results in a Standard OLG Model. An Interpretation," Economía Mexicana NUEVA ÉPOCA, , vol. 0(2), pages 191-208, July-Dece.
  • Handle: RePEc:emc:ecomex:v:13:y:2004:i:2:p:191-208

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    References listed on IDEAS

    1. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
    2. Blanchard Olivier & Weil Philippe, 2001. "Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(2), pages 1-23, November.
    3. 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.
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    5. Bullard James, 1994. "Learning Equilibria," Journal of Economic Theory, Elsevier, vol. 64(2), pages 468-485, December.
    6. Abba P. Lerner, 1959. "Consumption-Loan Interest and Money: Rejoinder," Journal of Political Economy, University of Chicago Press, vol. 67, pages 523-523.
    7. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, July.
    8. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March.
    9. Duffy John, 1994. "On Learning and the Nonuniqueness of Equilibrium in an Overlapping Generations Model with Fiat Money," Journal of Economic Theory, Elsevier, vol. 64(2), pages 541-553, December.
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