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On the convergence criterion in three-period lived overlapping generations models

Author

Listed:
  • Jean-Paul Barinci

    (Université Paris-Saclay, Univ Evry)

  • Hye-Jin Cho

    (Durham University)

  • Jean-Pierre Drugeon

    (CNRS-PSE)

Abstract

This paper offers a novel perspective on Kehoe-Levine’s convergence criterion for equilibrium determinacy in three-period overlapping generations (OLG) models. Departing from their primary focus on gross substitutability, our central contribution is demonstrating that equilibrium determinacy, even in Samuelson economies, can be achieved under market complementarities, provided the aggregate demand sensitivities to adjacent-period prices sum positively. Furthermore, we identify critical conditions where gross substitutability or complementarities between goods spaced two periods apart becomes pivotal for equilibrium determination. By elucidating the role of asymmetric complementarities, we significantly extend the understanding of equilibrium determinacy within the Kehoe-Levine framework, challenging the necessity of strict gross substitutability and offering a more nuanced view of dynamic stability in OLG models.

Suggested Citation

  • Jean-Paul Barinci & Hye-Jin Cho & Jean-Pierre Drugeon, 2025. "On the convergence criterion in three-period lived overlapping generations models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 80(2), pages 541-563, September.
    • Handle: RePEc:spr:joecth:v:80:y:2025:i:2:d:10.1007_s00199-025-01665-1
    DOI: 10.1007/s00199-025-01665-1
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    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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