Infinite-Horizon and Overlapping-Generations Models

Vîntu, Denis (2025): Infinite-Horizon and Overlapping-Generations Models.

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.

• Item Type: MPRA Paper
• Language: English
• 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
• Subjects: D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; J - Labor and Demographic Economics > J1 - Demographic Economics > J11 - Demographic Trends, Macroeconomic Effects, and Forecasts; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J64 - Unemployment: Models, Duration, Incidence, and Job Search

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