Journal article
Resurrecting equilibria through cycles in an overlapping generations model of money
Journal of macroeconomics, v 32(2), pp 515-526
01 Jun 2010
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Momentary equilibria are defined as points that satisfy agents optimality conditions and market clearing at any date. However, some dynamic sequences commencing from such points may not be considered valid equilibria because they asymptotically violate some economic restriction of the model. This paper studies a pure-exchange monetary overlapping generations economy in which young and old agents face exogenous minimum consumption requirements, and money is the only asset. The presence of the minimum consumption requirement on the old is shown to produce multiperiodic monetary equilibria in which real balances cycle forever between "momentary" equilibrium points (those which generate monetary sequences that potentially violate equilibrium strictures asymptotically). The novelty is to show that segments of the intergenerational offer curve that would have been deemed dynamically invalid can, in fact, be used to produce asymptotically valid cyclical paths. Indeed, a limit cycle can bestow dynamic validity on momentary equilibrium points that had erstwhile been classified as dynamically invalid. (C) 2010 Elsevier Inc. All rights reserved.
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Details
- Title
- Resurrecting equilibria through cycles in an overlapping generations model of money
- Creators
- Richard C. Barnett - Villanova UniversityJoydeep Bhattacharya - Iowa State UniversityHelle Bunzel - Iowa State University
- Publication Details
- Journal of macroeconomics, v 32(2), pp 515-526
- Publisher
- LOUISIANA STATE UNIV PR
- Number of pages
- 12
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics); Bennett S. LeBow College of Business; Drexel University
- Web of Science ID
- WOS:000278646500002
- Scopus ID
- 2-s2.0-77951878778
- Other Identifier
- 991019551543904721
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Economics