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Complex Dynamics and Inflation Volatility: An Overlapping Generations Approach

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  • Mohamed, Saladin

Abstract

\noindent This paper demonstrates how a purely random central bank policy generates endogenous economic fluctuations in an overlapping generations (OLG) model. By pivoting from traditional physical stores of value (like capital or renewable resources) to nominal fiat money, we explore how a completely random, noisy central bank money supply affects precautionary savings, inflation volatility, and macroeconomic stability. We find that the economy's stability depends entirely on the intertemporal elasticity of substitution, echoing the mathematical mechanics of earlier resource-based models, and proving that monetary unpredictability is a systemic distortion rather than neutral noise.

Suggested Citation

  • Mohamed, Saladin, 2026. "Complex Dynamics and Inflation Volatility: An Overlapping Generations Approach," MPRA Paper 128547, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:128547
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    References listed on IDEAS

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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