Intertemporally dependent preferences and optimal dynamic behavior

Tapan Mitra and Kazuo Nishimura

International Journal of Economic Theory, 2006, vol. 2, issue 2, 77-104

Abstract: We study a model of optimal dynamic behavior in which the intertemoral preferences preserve the time additively separable framework of Ramsey models, while exhibiting Edgeworth–Pareto complementarity between consumption in adjacent periods. We identify economic environments in which global optimal dynamics under intertemporal complementarity exhibits persistent fluctuations even though the misspecified Ramsey‐type theory, under the intertemporal independence assumption, predicts monotone convergence.

Date: 2006
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https://doi.org/10.1111/j.1742-7363.2006.00025.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:2:y:2006:i:2:p:77-104

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