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Equilibrium price dynamics in an overlapping-generations exchange economy

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  • Paulo Brito
  • Rui Dilao

Abstract

We present a continuous time overlapping generations model for an endowment Arrow-Debreu economy with an age-structured population. For an economy with a balanced growth path, we prove that Arrow-Debreu equilibrium prices exist, and their dynamic properties are age-dependent. Our model allows for an explicit dependence of prices on critical age-specific endowment parameters. We show that, if endowments are distributed earlier than some critical age, then speculative bubbles for prices do exist.

Suggested Citation

  • Paulo Brito & Rui Dilao, 2006. "Equilibrium price dynamics in an overlapping-generations exchange economy," Working Papers Department of Economics 2006/27, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
  • Handle: RePEc:ise:isegwp:wp272006
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    Cited by:

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    2. Brito Paulo & Marini Giancarlo & Piergallini Alessandro, 2016. "House prices and monetary policy," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(3), pages 251-277, June.
    3. D'ALBIS Hippolyte & AUGERAUD-VÉRON Emmanuelle, 2009. "Continuous-Time Overlapping Generations Models," LERNA Working Papers 09.15.291, LERNA, University of Toulouse.
    4. d'Albis, Hippolyte & Augeraud-Véron, Emmanuelle & Schubert, Katheline, 2010. "Demographic-economic equilibria when the age at motherhood is endogenous," Journal of Mathematical Economics, Elsevier, vol. 46(6), pages 1211-1221, November.
    5. d’Albis, Hippolyte & Augeraud-Véron, Emmanuelle & Hupkes, Hermen Jan, 2015. "Local determinacy of prices in an overlapping generations model with continuous trading," Journal of Mathematical Economics, Elsevier, vol. 58(C), pages 16-24.
    6. Sun, Ruoyan, 2013. "Kinetics of jobs in multi-link cities with migration-driven aggregation process," Economic Modelling, Elsevier, vol. 30(C), pages 36-41.
    7. Mario G.R. Pagliacci & Ion Partachi & Georgiana Nitu & Alexandru Badiu, 2016. "Setting the market price," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(4), pages 48-50, April.
    8. Brito, Paulo, 2008. "Equilibrium asset prices and bubbles in a continuous time OLG model," MPRA Paper 10701, University Library of Munich, Germany.
    9. Brito, Paulo, 2014. "Interest rates and endogenous population growth: joint age-dependent dynamics," MPRA Paper 58656, University Library of Munich, Germany.

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    More about this item

    Keywords

    Arrow-Debreu equilibrium; overlapping generations models; McKendrick model.;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • J0 - Labor and Demographic Economics - - General

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