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Endogenous Business Cycles in OLG Economies with Multiple Consumption Goods

Author

Listed:
  • Carine Nourry

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, IUF - Institut Universitaire de France - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche)

  • Alain Venditti

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, EDHEC Business School - Département Comptabilité, Droit, Finance et Economie)

Abstract

We consider an OLG economy with two consumption goods. There are two sectors that produce a pure consumption good and a mixed good which can be either consumed or used as capital. We prove that the existence of Pareto optimal expectations-driven fluctuations is compatible with standard sectoral technologies if the share of the pure consumption good is low enough. Following Reichlin's (1986, Journal of Economic Theory, 40, 89-102) influential conclusion, this result suggests that some fiscal policy rules can prevent the existence of business-cycle fluctuations in the economy by driving it to the optimal steady state as soon as it is announced.

Suggested Citation

  • Carine Nourry & Alain Venditti, 2011. "Endogenous Business Cycles in OLG Economies with Multiple Consumption Goods," Working Papers halshs-01059578, HAL.
  • Handle: RePEc:hal:wpaper:halshs-01059578
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01059578
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    References listed on IDEAS

    as
    1. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-1386, November.
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    3. Drugeon, Jean-Pierre & Nourry, Carine & Venditti, Alain, 2010. "On efficiency and local uniqueness in two-sector OLG economies," Mathematical Social Sciences, Elsevier, vol. 59(1), pages 120-144, January.
    4. Nourry, Carine & Venditti, Alain, 2011. "Local indeterminacy under dynamic efficiency in a two-sector overlapping generations economy," Journal of Mathematical Economics, Elsevier, vol. 47(2), pages 164-169, March.
    5. Reichlin, Pietro, 1986. "Equilibrium cycles in an overlapping generations economy with production," Journal of Economic Theory, Elsevier, vol. 40(1), pages 89-102, October.
    6. Grandmont, Jean-Michel & Pintus, Patrick & de Vilder, Robin, 1998. "Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles," Journal of Economic Theory, Elsevier, vol. 80(1), pages 14-59, May.
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    10. Venditti, Alain, 2005. "The two sector overlapping generations model: A simple formulation," Research in Economics, Elsevier, vol. 59(2), pages 164-188, June.
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    More about this item

    Keywords

    endogenous fluctuations; local indeterminacy; two-sector OLG model; multiple consumption goods; dynamic efficiency;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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