Frequency of trade and the determinacy of equilibrium in economies of overlapping generations
Demichelis and Polemarchalis (2007) highlighted the role played by the frequency of trade on the degree of indeterminacy of equilibrium in economies of overlapping generations. Assuming that time has a finite starting point and extends into the infinite future, they prove that the degree of indeterminacy increases with the number of periods in the life-span of individuals, which is assumed to be deterministic. We show that this result does not hold when individual longevity is represented by an exponential survival function: the degree of indeterminacy depends on individual preferences and monetary policy but is independent of the frequency of trade.
|Date of creation:||20 Nov 2012|
|Date of revision:|
|Publication status:||Published in International Journal of Economic Theory 9.1(2013): pp. 85-100|
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