THE ECONOMICS OF INDETERMINACY IN OVERLAPPING GENERATIONS MODELS

Recent research indicates that there are robust examples of overlapping generations economies in which there are indeterminate equilibria without fiat money and equilibria with more than one dimension of indeterminacy. This paper presents simple examples of a stationary, pure exchange overlapping generations economy with one good in each period and a representative consumer, who lives for three periods, in each generation. These examples exhibit every possible form of indeterminacy and instability. Furthermore, the parameters of the principal example agree with empirical evidence. We use our examples as case studies for analyzing the problems involved in computing the equilibria of such economies. © 1990.