Endogenous Business Cycles in OLG Economies with Multiple Consumption Goods

Carine Nourry and Alain Venditti

Working Papers from HAL

Abstract: We consider an OLG economy with two consumption goods. There are two sectors that produce a pure consumption good and a mixed good which can be either consumed or used as capital. We prove that the existence of Pareto optimal expectations-driven fluctuations is compatible with standard sectoral technologies if the share of the pure consumption good is low enough. Following Reichlin's (1986, Journal of Economic Theory, 40, 89-102) influential conclusion, this result suggests that some fiscal policy rules can prevent the existence of business-cycle fluctuations in the economy by driving it to the optimal steady state as soon as it is announced.

Keywords: endogenous fluctuations; local indeterminacy; two-sector OLG model; multiple consumption goods; dynamic efficiency (search for similar items in EconPapers)
Date: 2011-03
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01059578
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Working Paper: Endogenous Business Cycles in OLG Economies with Multiple Consumption Goods (2014)
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