Monetary and Fiscal Policy When People Have Finite Lives /
We find a sufficient condition for a three-generation Overlapping Generations (OLG) model to possess four steady-state equilibria and we show that our result also holds in a 62- generation model where the income process is calibrated to U.S. data. In our calibrated model, there exists a dynamically...
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- Sprache:
- Englisch
- Veröffentlicht:
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Cambridge, Mass.
National Bureau of Economic Research
2019.
- Zusammenfassung:
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We find a sufficient condition for a three-generation Overlapping Generations (OLG) model to possess four steady-state equilibria and we show that our result also holds in a 62- generation model where the income process is calibrated to U.S. data. In our calibrated model, there exists a dynamically efficient steady state equilibrium where money has positive value and where both the price level and the real interest rate are indeterminate. There are no frictions or rigidities of any kind other than the natural assumption that people are born and die at different dates. Our paper is the first to provide a long-lived example of an OLG model in which there exists an indeterminate steady state where money has value when both monetary and fiscal policy are active. Our work has implications for the question of which fiscal and monetary policies are welfare improving and which are not.
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- 1 online resource: illustrations (black and white);
- Anmerkungen:
- January 2019.
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