Complex dynamics in an OLG model of growth with inherited tastes

Luciano Fanti, Luca Gori (), Mammana Cristiana and Michetti Elisabetta

MPRA Paper from University Library of Munich, Germany

Abstract: The aim of this article is to study the local and global dynamics of a general equilibrium closed economy with overlapping generations and inherited tastes (aspirations). It shows that the interaction between the intensity of aspirations and the elasticity of substitution of effective consumption, affects the qualitative and quantitative long-term dynamics of the model. In addition, periodic cycles and complex features emerge. It remarkably extends the literature on endogenous fluctuations showing that: 1) in an OLG model with aspirations there exists a super-critical Neimark-Sacker bifurcation, 2) endogenous fluctuations occur even when the elasticity of substitution of effective consumption is smaller than one, thus reconciling the existence of economic cycles with empirical estimates, and 3) the interaction between aspirations and inter-temporal preferences affects the steady-state equilibrium and dynamic outcomes.

Keywords: Aspirations; Nonlinear dynamics; Overlapping generations; Bifurcations; Business cycles (search for similar items in EconPapers)
JEL-codes: C61 C62 C68 E32 J22 O41 (search for similar items in EconPapers)
Date: 2016-03-08
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/69906/1/MPRA_paper_69906.pdf original version (application/pdf)

Related works:
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:pra:mprapa:69906

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().