Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211996 
Authors: 
Year of Publication: 
2004
Series/Report no.: 
Bank of Finland Discussion Papers No. 29/2004
Publisher: 
Bank of Finland, Helsinki
Abstract: 
I explore the dynamics in overlapping generations models with pure exchange and lump-sum taxes, when the second period after tax endowment is negative, and contrast the characteristics of equilibria to those of models with positive after tax endowments. In particular, if the intertemporal elasticity of substitution is less than unity, there can be only a two cycle or stable (ie indeterminate) equilibria for certain parameter values.With this value for that elasticity chaos and a cycle of any order can occur in a model with regular endowments.In a sense the lump-sum taxation in this model operates as a stabilizing device.The precise stability condition holds with a small discount factor and in economies with relatively high taxes in the first period.If the intertemporal elasticity of substitution is greater than unity, the steady state equilibria are unstable, and thus determinate, as is the case with the regular model.
Subjects: 
overlapping generations economy
saving
cycles
lump-sum taxation
JEL: 
E21
E32
Persistent Identifier of the first edition: 
ISBN: 
952-462-182-7
Document Type: 
Working Paper

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