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Questions tagged [olg]

With reference to overlapping generation models (OLG models).

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Myopic and perfect foresight in an OLG model

How can we show that the dynamics in a 2-period OLG model can be non-monotonic when forecasts are myopic? And, under which conditions, do myopic and perfect foresight coincide?
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Do all OLG models posess the possiblity of dynamic inefficiency?

Do all OLG models posess the possiblity of dynamic inefficiency or is this just a feature of the diamond model?
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Diamond OLG model: Understanding Dynamic Inefficiency

I've been having difficulty understanding how exactly dynamic inefficiency occurs both mathematically and graphically in the Diamond OLG model. The reason why I'm saying this is because even after ...
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Why in maximization in OLG model with 1 generations we assume that both consumptions are positive?

I have an OLG model with constant level of technology and population. The utility of agent who is born in period t is: U() = c1,t + 1/1+pC2,t+1 My textbook asks me to write the maximization problem ...
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Perpetual Youth Model

I am reading the famous paper of Blanchard,1985. There are some fundamental stuff that I did not really get. 1) Why they call it "perpetual youth"? 2) On page 225, he mentions the cohort size. So, ...
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survival probability and integration by parts

I am trying to integrate by parts by using an indicator function. However, I am not really sure if it is a correct way to change the bounds of integral with indicator functions. I am trying to deal ...
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195 views

Market clearing condition with Walras law

I have a diamond overlapping model The question is as follows Let us consider an infinitely lived production economy populated at time t by $N_t$ identical and perfectly competitive adult ...
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“If $\lambda$ is greater than than 1, the system explodes.” Why does the system explode?

David Romer in his textbook Advanced Macroeconomics (Third Edition) writes regarding the speed of convergence of the Diamond model the following: (Pg. 83) Equation (2.60) [$k_{t+1}={1\over{(1+n)(1+...
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When do the Old consume capital in OLG model?

In Diamond's OLG model, why is capital equal to saving by the young in previous period? In that question, it is asked why $K_{t+1} = s_TL_t$. It is answered that the capital $K_t$ disappears, as ...
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In Diamond's OLG model, why is capital equal to saving by the young in previous period?

In Diamond's OLG model, why is capital in the next period equal to total savings by the young in the current period? What happeend to the pre-existing capital? Surely it doesn't just cease to exist? ...
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1answer
146 views

OLG - Government Budget Constraint

Consider a two period OLG model where each young agent recieves an endowment of $w$ units of the single commodity good in the 1st period of his/her life, and nothing in the second period. Each ...
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1answer
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Interest/Rental Rate is today's or tomorrow's MPK?

I recently posted and have since deleted a question regarding Exercise 2.1 in McCandless's "The ABCs of RBCs." The exercise involves deriving a first-order difference equation describing aggregate ...
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Altruistic Preferences (bequest motive) in Overlapping Generations Model

Does bequest motive cause dynamic inefficiency or not in OLG?
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How do I find out which form of utility function is being used?

Can someone tell my how i can figure out which type of utility function the following maximization problem has. It is for an overlapping generations model. $$\underset{x'}{\max} x'\big(E_t (P_{t+1}+...
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What is the true source of dynamic(Pareto) inefficiency in OLG models?

This question confuses me for some time. My first impression is that Pareto sub-optimality is due to feature that old generations will consume everything without any incentive to trade. But after ...