Short-memory equilibrium in stochastic overlapping generations economies

Alessandro Citanna () and Paolo Siconolfi
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Alessandro Citanna: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: n stochastic OLG exchange economies, we show that short-memory equilibria—the natural extension from deterministic economies of steady states, low-order cycles, or finite state-space stationary sunspots equilibria—fail to exist generically in utilities. As a result, even with independent and identically distributed exogenous shocks there is serial correlation in endogenous economic variables in equilibrium. This arises even if utilities are time-separable, some goods inferior, and there are no technological lags. Hence, the origins of economic fluctuations can be traced only to the demographic structure of a heterogeneous agent, multiple-good economy

Keywords: Overlapping generations; Real business cycle; Equilibrium (search for similar items in EconPapers)
Date: 2007-05
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Published in Journal of Economic Theory, 2007, 134 (1), pp.448-469. ⟨10.1016/j.jet.2006.04.006⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00170371

DOI: 10.1016/j.jet.2006.04.006

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