Determinacy of equilibrium in stationary economies with both finite and infinite lived consumers

Abstract

We consider the determinacy of perfect foresight equilibrium near steady-state equilibria of stationary infinite-horizon economies. The work of T. J. Kehoe and D. K. Levine ( Econometrica 53 (1985) , 433–453) is generalized by the inclusion of both infinite lived agents and overlapping generations of finite lived agents, and the inclusion of production and non-depreciating pure rents. We show that indeterminacy is possible in robust examples, and that the dimension of the indeterminacy can be as large as the number of goods per period. We also discuss extreme cases in which determinacy is guaranteed.