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

2024/11/12 by Ngoc‐Sang Pham, Pham, Ngoc-Sang · 1 citation
Economics, Econometrics and Finance · #Economic Policies and Impacts #Economic theories and models #FOS: Economics and business #General Finance (q-fin.GN) #Monetary Policy and Economic Impact

paper · pdf · doi:10.48550/arxiv.2411.07674

openalex publication_date 2024/11/12 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01

Abstract

We prove that a two-cycle equilibrium in a general equilibrium model with infinitely-lived agents (GEILA) 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 GEILA model. Our framework, which includes three assets (physical capital, a Lucas tree, and fiat money), encompasses both exchange and production economies. As an application, we demonstrate that equilibrium indeterminacy and rational asset price bubbles can arise not only in OLG models but also in GEILA models.

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