Minimum consumption requirements and cycles in an overlapping generations model of money [Resurrecting Equilibria Through Cycles]

Richard Barnett, Joydeep Bhattacharya and Helle Bunzel

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This paper studies a pure-exchange monetary overlapping generations economy in which young and old agents face exogenous minimum consumption requirements, and money is the only asset. The presence of the minimum consumption requirement on the old is shown to produce multiperiodic monetary equilibria in which real balances cycle forever between "momentary" equilibrium points (those which generate monetary sequences that potentially violate equilibrium strictures asymptotically).

Date: 2007-07-26
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