Monetary and Fiscal Policy When People Have Finite Lives

Roger Farmer and Pawel Zabczyk

No 25445, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The theoretical models that underpin macroeconomic policy analysis typically consist of one or more sets of interacting infinite-horizon agents. In the absence of frictions of any kind and in the presence of commonly maintained simplifying assumptions, these models possess a unique rational expectations equilibrium which is determined by economic fundamentals. This property is critical if comparative statics are to be useful to explain how a given intervention will influence economic outcomes. This paper demonstrates that the uniqueness property does not carry over to economic models with more realistic population demographics. We construct a 62-generation overlapping generations model with production where agents have a hump-shaped labor endowment calibrated to U.S. data and we show that, in our model, both nominal and relative prices are indeterminate.

JEL-codes: E31 E58 H62 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.nber.org/papers/w25445.pdf (application/pdf)

Related works:
Working Paper: Monetary and Fiscal Policy when People have Finite Lives (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:25445

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w25445

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().