Financial intermediaries may increase economic efficiency through intertemporal risk smoothing. However without an adequate regulation, intermediation may fail to do this. This paper studies the effects of a production shock in a closed economy and compares abilities of market-based and...

Financial intermediaries may increase economic efficiency through intertemporal risk smoothing. However without an adequate regulation, intermediation may fail to do this. This paper studies the effects of a production shock in a closed economy and compares abilities of market-based and...

The global fall in interest rates in recent decades has raised the possibility of a negative natural rate of interest. The secular stagnation hypothesis argues that a negative natural rate of interest is the underlying cause of the Great Recession. In this paper I demonstrate the role of bubbles...

We propose a criterion for determining whether a local policy analysis can be made in a given equilibrium in an overlapping generations model. The criterion can be applied to models with infinite past and future as well as those with a truncated past. The equilibrium is not necessarily a steady...

This paper shows the general reversibility of every perfect foresight equilibrium of an overlapping generations economy. It then shows and characterizes the existence of reversible sunspot equilibria in these economies as well, which seems to be at odds with our intuition about the...

We study an overlapping generations version of the principal-agent problem, where incentive contracts are determined in general equilibrium. All individuals are workers when young, but have a choice between becoming entrepreneurs or remaining workers when old. Imperfections in the credit market...

We study an overlapping generations version of the principal-agent problem, where incentive contracts are determined in general equilibrium. All individuals are workers when young, but have a choice between becoming entrepreneurs or remaining workers when old. Imperfections in the credit market...

This note shows that there are monetary equilibria in the model of overlapping generations that are in the core. Some equilibria have positive stocks of outside money in every generation. These equilibria are thus self-enforcing, and introducing money into an economy need not be tantamount to...

Equilibrium paths in economies of overlapping generations depend on the frequency of trade. In a standard example, determinacy obtains as the frequency of trades tends to infinity or trade occurs in continuous time. If time extends infinitely into the infinite past as well as into the infinite...