Existence of a Pareto-Optimal Equilibrium in Nearly-Stationary Overlapping-Generations Economies

Jonathan Burke

Economic Theory, 1995, vol. 5, issue 2, 247-61

Abstract: In overlapping-generations models of fat money, the existence of a Pareto-optimal equilibrium-which defines an optimal quantity of money-is more general than well-known counter-examples suggest. Those examples, having no optimal equilibrium just because there are small variations in households' tastes and endowments across generations, are not typical. On the contrary: For an open-dense, full-measure subset of smooth stationary economies and an open-dense subset of continuous stationary economies, introducing small variations in tastes and endowments across generations preserves the existence of an optimal equilibrium. Put simply, optimal equilibria generically exist for nearly-stationary economies.

Date: 1995
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