 Resurrecting Equilibria Through CyclesRichard Barnett, Joydeep Bhattacharya and Helle Bunzel Economics Working Papers from Department of Economics and Business Economics, Aarhus University Abstract: In an overlapping generations model, momentary equilibria are defined as points that lie on the intergenerational offer curve, i.e., they 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. The literature has always ruled out such paths. This paper studies a pure-exchange monetary overlapping generations economy in which real balances cycle forever between momentary equilibrium points. The novelty is to show that segments of the offer curve that have been previously ignored, can in fact be used to produce asymptotically valid cyclical paths. Indeed, a cycle can bestow dynamic validity on momentary equilibrium points that had erstwhile been classified as dynamically invalid. Keywords: overlapping generations models; monetary equilibria; cycles; minimum consumption requirements (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2007-12 Access Statistics for this paper More papers in Economics Working Papers from Department of Economics and Business Economics, Aarhus University |
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