In an exogenous-growth economy with overlapping generations, the Cobb-Douglas production, any positive life-cycle productivity, and time-separable constant elasticity of substitution (CES) utility, we analyze local stability of a balanced growth equilibrium (BGE) with respect to changes in consumption endowments, which could be interpreted as a transfer policy. We show that generically, in the space of parameters, equilibria around a BGE are locally unique and are locally differentiable functions of endowments, with derivatives given by kernels. Furthermore, those equilibria are stable in the sense that the effects of temporary changes decay exponentially toward ±∞.
Bibliographical notePublisher Copyright:
© 2017 Cambridge University Press.
- Exogenous Growth
- Overlapping Generations
- Policy Evaluation
- Regularity of Infinite Economies
ASJC Scopus subject areas
- Economics and Econometrics