The relationship between general equilibrium models with infinite-lived agents and overlapping generations models, and some applications

Pham, Ngoc-Sang (2024): The relationship between general equilibrium models with infinite-lived agents and overlapping generations models, and some applications.

Abstract

We prove that a two-cycle equilibrium in a general equilibrium model with infinitely-lived agents also constitutes an equilibrium in an overlapping generations (OLG) model. Conversely, an equilibrium in an OLG model that satisfies additional conditions is part of an equilibrium in a general equilibrium model with infinitely-lived agents. Applying this result, we demonstrate that equilibrium indeterminacy and rational asset price bubbles may arise in both types of models.

• Item Type: MPRA Paper
• Language: English
• Keywords: infinite-horizon, general equilibrium, overlapping generations, asset price bubble, equilibrium indeterminacy.
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling; D - Microeconomics > D5 - General Equilibrium and Disequilibrium; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates

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