Can Heterogeneous Preferences Stabilize Endogenous Fluctuations?
While most of the literature concerned with indeterminacy considers a representative agent, some recent works have investigated the role of heterogenous agents on dynamics. This paper adds a contribution to the debate, stressing the effects of heterogeneity in consumers’ preferences within an overlapping generations economy with capital accumulation and consumption in both periods. We show that such an heterogeneity can stabilize fluctuations in many cases, by simply reducing the range of parameters compatible with indeterminacy.
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