On the convergence criterion in three-period lived overlapping generations models

Jean-Paul Barinci (), Hye-Jin Cho and Jean-Pierre Drugeon ()
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Jean-Paul Barinci: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay
Hye-Jin Cho: Durham University
Jean-Pierre Drugeon: CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris

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Abstract: This paper offers a novel perspective on Kehoe-Levine's convergence criterion for equilibrium determinacy in three-period overlapping generations (OLG) models. Departing from their primary focus on gross substitutability, our central contribution is demonstrating that equilibrium determinacy, even in Samuelson economies, can be achieved under market complementarities, provided the aggregate demand sensitivities to adjacent-period prices sum positively. Furthermore, we identify critical conditions where gross substitutability or complementarities between goods spaced two periods apart becomes pivotal for equilibrium determination. By elucidating the role of asymmetric complementarities, we significantly extend the understanding of equilibrium determinacy within the Kehoe-Levine framework, challenging the necessity of strict gross substitutability and offering a more nuanced view of dynamic stability in OLG models.

Date: 2025
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Published in Economic Theory, inPress, ⟨10.1007/s00199-025-01665-1⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-05158454

DOI: 10.1007/s00199-025-01665-1

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