Existence and Calculation of Optimal Monetary Equilibria on Overlapping Generations Economies
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| Format: | Preprint |
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2025
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| _version_ | 1866911682456977408 |
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| author | Dognini, Leandro Lyra Braga |
| author_facet | Dognini, Leandro Lyra Braga |
| contents | A well-known feature of overlapping generations economies is that the First Welfare Theorem fails and equilibrium may be inefficient. The Cass (1972) criterion furnishes a necessary and sufficient condition for efficiency, but it does not address the existence of efficient equilibria, and Cass, Okuno, and Zilcha (1979) provide nonexistence examples. A closely related question (known as the Hahn (1965) problem) deals with the existence of monetary equilibria. In this paper, I provide sufficient conditions for the existence of optimal monetary equilibria on consumption-loan, non-stationary overlapping generations economies without durable, dividend-paying assets, cash-in-advance constraints, wealth-transfer mechanisms, or transaction costs. Essentially, the economy must be prone to savings. Furthermore, I develop an algorithm to find these optimal monetary equilibria as the limit of nested compact sets. These compact sets are the result of a backward calculation through equilibrium equations departing from the set of optimal monetary equilibria of well-behaved tail economies. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2509_19019 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Existence and Calculation of Optimal Monetary Equilibria on Overlapping Generations Economies Dognini, Leandro Lyra Braga Theoretical Economics A well-known feature of overlapping generations economies is that the First Welfare Theorem fails and equilibrium may be inefficient. The Cass (1972) criterion furnishes a necessary and sufficient condition for efficiency, but it does not address the existence of efficient equilibria, and Cass, Okuno, and Zilcha (1979) provide nonexistence examples. A closely related question (known as the Hahn (1965) problem) deals with the existence of monetary equilibria. In this paper, I provide sufficient conditions for the existence of optimal monetary equilibria on consumption-loan, non-stationary overlapping generations economies without durable, dividend-paying assets, cash-in-advance constraints, wealth-transfer mechanisms, or transaction costs. Essentially, the economy must be prone to savings. Furthermore, I develop an algorithm to find these optimal monetary equilibria as the limit of nested compact sets. These compact sets are the result of a backward calculation through equilibrium equations departing from the set of optimal monetary equilibria of well-behaved tail economies. |
| title | Existence and Calculation of Optimal Monetary Equilibria on Overlapping Generations Economies |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2509.19019 |