Stability of steady-state equilibrium for overlapping generation model
This is a summary of discussion with Alecos Papadopoulos at http://economics.stackexchange.com/questions/16118/stability-of-steady-state-equilibrium-for-overlapping-generation-model as well as from what I learnt and thought in my graduate macroeconomics class. Draft version. You are welcome to go to http://economics.stackexchange.com/questions/16118/stability-of-steady-state-equilibrium-for-overlapping-generation-model to comment and answer. In draft edition of Daron Acemoglu's Introduction to Modern Economic Growth (2007), proposition 9.4 which states that: In the overlapping-generations model with two-period lived households, Cobb-Douglas technology and CRRA preferences, there exists a unique steady-state equilibrium with the capital-labor ratio k* given by (9.15) and as long as $\theta \geq 1$ , this steady-state equilibrium is globally stable for all k (0) > 0. has a typo. In 2009 edition of the textbook, proposition 9.4 is corrected to: In the overlappin...