Trend-reverting fluctuations in the life-cycle model

Costas Azariadis (), James Bullard () and Lee Edward Ohanian ()

No 1998-015, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Aggregate time series provide evidence of short term dynamic adjustment that appears to be governed by complex or negative real eigenvalues. This finding is at odds with the predictions of reasonably parameterized, convex one-sector growth models with complete markets. We study life cycle economies in which aggregate saving depends non-trivially on the distribution of wealth among cohorts. If consumption goods are weak gross substitutes near the steady state price vector, we prove that the unique equilibrium of a life cycle exchange economy converges to the unique non-monetary steady state via damped oscillations. We also discuss examples and extensions. ; Earlier title: Complex Eigenvalues and Trend-Reverting Fluctuations

Keywords: Business cycles; Econometric models; Time-series analysis; Regression analysis (search for similar items in EconPapers)
Date: 2001
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Journal Article: Trend-reverting fluctuations in the life-cycle model (2004)
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