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Stabilizing Endogenous Fluctuations with Fiscal Policies: Global Analysis on Piecewise Continuous Dynamical Systems

Emmanuelle Augeraud-Véron () and Augier L.
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Augier L.: University of La Rochelle

Studies in Nonlinear Dynamics & Econometrics, 2001, vol. 5, issue 1, 1-18

Abstract: This paper considers a one-sector overlapping-generations model with production. We observe that under standard assumptions on preferences and technology, the perfect-foresight equilibrium violates positivity constraints for large sets of initial conditions. The consideration of the positivity constraints of the consumer enables degenerate equilibrium, a perfect-foresight equilibrium that remains in the trivial steady state from a certain time, to be defined. To correct this unsatisfactory situation, we introduce a mechanism redistributing resources among generations by levying taxes.

Date: 2001
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