Existence and stability of equilibria in OLG models under adaptive expectations
In this paper we deal with an Overlapping Generations Model with production under three diverse assumptions about agents rationality; rational, adaptive and myopic expectations. We determine a uniqueness condition for stationary steady states in the model with perfect foresight which rests on the second derivatives of the production and utility functions. Such condition results to be more restrictive than the one developed for the model with myopic expectations which, due to the correspondence among steady states of the three models, could be considered as an alternative. Further, we completely develop the analysis of the model under adaptive expectations. We derive stability conditions and determine the bifurcation diagram in all the three cases. From the comparison it results that stability conditions for the case with rational expectations are less restrictive than for both adap- tive and myopic ones. We notice that, differently from what happens in the OLG model of pure exchange, the adaptive expectations do not improve local stability performances of the model with respect to myopic expectations; this is due to the fact that in our two-dimensional model a Neimark-Hopf bifurcation could arise, cutting off part of the parameter space which results to be stable in the myopic case.
|Date of creation:||May 2001|
|Contact details of provider:|| Postal: Via delle Pandette 9 50127 - Firenze - Italy|
Phone: +39 055 2759707
Fax: +39 055 2759913
Web page: http://www.disei.unifi.it/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:flo:wpaper:2001-01. 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: (Michele Gori)
If references are entirely missing, you can add them using this form.