The Value of Money in an Overlapping Generations Model: A Note

Journal of Economic Theory, Vol. 59, pp. 214-221, 1993

Posted: 7 Jan 2010

See all articles by Stephen Burnell

Stephen Burnell

Victoria University of Wellington - School of Economics & Finance

Date Written: 1993

Abstract

In this paper a simple overlapping generations model – with N perishable commodities, no intrinsic uncertainty, one agent per generation with an intertemporally separable utility function, and one asset; money – is constructed. To this basic model, two extrinsic states of nature (h {1, 2}) are added, at date 2. Sufficient conditions are found to ensure a continuum of rational expectations equilibria exist with the property that money is worthless if h = 1. The result is then extended to money becoming worthless with positive probability, for a finite number of dates.

Keywords: Overlapping generations model, Utility function, Money

JEL Classification: C62, D51, E41

Suggested Citation

Burnell, Stephen, The Value of Money in an Overlapping Generations Model: A Note (1993). Journal of Economic Theory, Vol. 59, pp. 214-221, 1993, Available at SSRN: https://ssrn.com/abstract=1532485

Stephen Burnell (Contact Author)

Victoria University of Wellington - School of Economics & Finance

P.O. Box 600
Wellington, 6140
New Zealand

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