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Existence of a Pareto-optimal equilibrium in nearly-stationary overlapping-generations economies

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Summary

In overlapping-generations models of fiat money, the existence of a Pareto-optimal equilibrium — which defines an optimal quantity of money — is more general than well-known counter-examples suggest. Those examples, having no optimal equilibrium just because there are small variations in households' tastes and endowments across generations, are not typical. On the contrary: For an open-dense, full-measure subset of smooth stationary economies and an open-dense subset of continuous stationary economies, introducing small variations in tastes and endowments across generations preserves the existence of an optimal equilibrium. Put simply, optimal equilibria generically exist for nearly-stationary economies.

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  1. Economics Department, University of Texas, 78712-1173, Austin, TX, USA

    Jonathan L. Burke

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  1. Jonathan L. Burke
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I thank Scott Freeman, Katsuhiko Kawai, and two referees for proofreading this text; all lead to clarifications.

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Burke, J.L. Existence of a Pareto-optimal equilibrium in nearly-stationary overlapping-generations economies. Econ Theory 5, 247–261 (1995). https://doi.org/10.1007/BF01215202

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