Determinate perfect foresight forecasting in overlapping generations models. (English) Zbl 1479.91208
Summary: In this paper, we show the existence of the perfect foresight forecast functions which generate unique and stable equilibrium price dynamics for comparative static analysis and calibration in multi-period overlapping generations models with cohort heterogeneity, multiple goods, and fiat money. We also show how to recover such forecast functions up to the first order using the eigenvalues and eigenvectors of the Jacobian matrix of the equilibrium conditions. In a special one good case, our construction of the forecast functions requires information about only the eigenvalues. In addition, we demonstrate that the stable subspace where the price sequences generated by the linearized forecast functions exist is also an invariant cyclic subspace.
MSC:
| 91B62 | Economic growth models |
Keywords:
perfect foresight forecasts; determinacy of equilibrium; overlapping generations models; multi-periods; multi-goodsReferences:
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