Equilibrium price dynamics in an overlapping-generations exchange economy

Abstract

We present a continuous time overlapping generations model for an endowment Arrow-Debreu economy with an age-structured popu¬lation. For an economy with a balanced growth path, we prove that Arrow-Debreu equilibrium prices exist, and their dynamic properties are age-dependent. Our model allows for an explicit dependence of prices on critical age-specific endowment parameters. We show that, if endowments are distributed earlier than some critical age, then spec¬ulative bubbles for prices do exist