Overlapping Generations Models of General Equilibrium

John Geanakoplos ()
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John Geanakoplos: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/john-geanakoplos

No 1663, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The OLG model of Allais and Samuelson retains the methodological assumptions of agent optimization and market clearing from the Arrow-Debreu model, yet its equilibrium set has different properties: Pareto inefficiency, indeterminacy, positive valuation of money, and a golden rule equilibrium in which the rate of interest is equal to population growth (independent of impatience). These properties are shown to derive not from market incompleteness, but from lack of market clearing "at infinity;" they can be eliminated with land or uniform impatience. The OLG model is used to analyze bubbles, social security, demographic effects on stock returns, the foundations of monetary theory, Keynesian vs. real business cycle macromodels, and classical vs. neoclassical disputes.

Keywords: Demography; Inefficiency; Indeterminacy; Money; Bubbles; Cycles; Rate of interest; Impatience; Land; Infinity; Expectations; Social security; Golden rule (search for similar items in EconPapers)
JEL-codes: D1 D3 D5 D6 D9 E11 E12 E13 E2 E3 E4 E6 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008-05
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in Steven N. Durlauf and Lawrence E. Blume, eds., The New Palgrave Dictionary of Economics, 2d ed., 2008

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