The relationship between general equilibrium models with infinite-lived agents and overlapping generations models, and some applications
General Finance
2026-04-15 v5
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.
Cite
@article{arxiv.2411.07674,
title = {The relationship between general equilibrium models with infinite-lived agents and overlapping generations models, and some applications},
author = {Ngoc-Sang Pham},
journal= {arXiv preprint arXiv:2411.07674},
year = {2026}
}