Barnett, Richard C.; Bhattacharya, Joydeep; Bunzel, Helle

WP #07017, July 2007

This paper studies a pure-exchange monetary overlapping generations economy in which young and old agents face exogenous minimum consumption requirements, and money is the only asset. The presence of the minimum consumption requirement on the old is shown to produce multiperiodic monetary equilibria in which real balances cycle forever between "momentary" equilibrium points (those which generate monetary sequences that potentially violate equilibrium strictures asymptotically).

JEL Classification: E31, E42, E63

Keywords: overlapping generations model, cycles, monetary equilibria, minimum consumption requirements

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