Infinite-Horizon and Overlapping-Generations Models

Denis Vîntu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the relation between two widely used macroeconomic frameworks: the infinite-horizon general equilibrium model with infinitely-lived agents (GEILA) and the overlapping generations (OLG) model. We show that a two-cycle equilibrium of the GEILA model is an equilibrium of the OLG model, and conversely, an equilibrium of the OLG model can be viewed as a two-cycle equilibrium of the GEILA model. Using this equivalence, we explore the existence of equilibrium indeterminacy and rational asset price bubbles in both frameworks. Our results provide a unified perspective on these important economic phenomena across the two modeling approaches.

Keywords: Infinite-Horizon Model; Overlapping Generations Model (OLG); Intertemporal Optimization; Unemployment Dynamics; Labor Market Frictions; Generational Economics; Lifecycle Consumption; Savings Behavior; Macroeconomic Modeling; Employment Risk; Stochastic Employment; Fiscal Policy and Unemployment; Demographic Economics; Intergenerational Transfers; Economic Growth Models (search for similar items in EconPapers)
JEL-codes: D91 E21 E24 E40 E61 H55 J11 J64 (search for similar items in EconPapers)
Date: 2025-08, Revised 2025-08
New Economics Papers: this item is included in nep-dge
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