Introduction to Dynamic Macroeconomic Theory: An Overlapping Generations Approach / Edition 1

by George McCandless, Neil Wallace

Overview

Economies are constantly in flux, and economists have long sought reliable means of analyzing their dynamic properties. This book provides a succinct and accessible exposition of modern dynamic (or intertemporal) macroeconomics. The authors use a microeconomics-based general equilibrium framework, specifically the overlapping generations model, which assumes that in every period there are two generations which overlap. This model allows the authors to fully describe economies over time and to employ traditional welfare analysis to judge the effects of various policies. By choosing to keep the mathematical level simple and to use the same modeling framework throughout, the authors are able to address many subtle economic issues. They analyze savings, social security systems, the determination of interest rates and asset prices for different types of assets, Ricardian equivalence, business cycles, chaos theory, investment, growth, and a variety of monetary phenomena.

Introduction to Dynamic Macroeconomic Theory will become a classic of economic exposition and a standard teaching and reference tool for intertemporal macroeconomics and the overlapping generations model. The writing is exceptionally clear. Each result is illustrated with analytical derivations, graphically, and by worked out examples. Exercises, which are strategically placed, are an integral part of the book.

Product Details

ISBN-13:	9780674461116
Publisher:	Harvard University Press
Publication date:	01/01/1992
Edition description:	New Edition
Pages:	384
Product dimensions:	6.12(w) x 9.25(h) x 1.15(d)

About the Author

George McCandless is an economist at the Central Bank of Argentina.

Table of Contents

Preface

PART ONE: REAL ECONOMIES

1. Describing the Enviroment
Time

The Population

Total Resources

Feasible Consumption Allocations

Efficient Consumption Allocations

Preferences

Pareto Optimality

Reprise

2. Competitive Equilibrium

Private Ownership

Competitive Intragenerational Trade

Consumption Decisions

An Example

Savings Function

Competitive Equilibrium

An Example of a Competitive Equilibrium

Reprise

3. Introducing a Government

Taxes

Government Borrowing

Ricardian Equivalence

Rolling Over Government Debt

Equivalence between Equilibria with Bonds and Tax-Transfer Schemes

Reprise

Appendix: Proof of Ricardian Equivalence

4. Bequests

Generation 0 Cares about Generation 1

Diversity within Generations

All Generation Care about Their Children

Reprise

5. Long-Term Government Bonds

k-Period Bonds

Temporary Equilibrium

Perfect Foresight

Term Structure of Interest Rates

Reprise

6. Infinitely Lived Assets

Temporary Equilibrium with Land

An Example

A Price Function

Perfect Foresight Competitive Equilibria

Three Example Economies

The Price of Land and the Crop

International Capital Movements

Reprise

7. Equilibrium Fluctuations

Real Cycles

Multiple Nonstationary Equilibria

Equilibria with the Crop

Reprise

8. A Storage Technology

Feasible Allocations

Competitive Equilibrium

Finding a Competitive Equilibrium

Reprise

9. The Neoclassical Growth Model

The Physical Environment and the Feasible Allocations

Equilibrium Outputs, Inputs, and Factor Rentals at Each Date

The Individual Choice Decision under Perfect Foresight

A Definition of Equilibrium

Equilibrium Paths when n=1 and g=0

Equilibrium Paths when n>1 and g=0

Equilibrium Paths when n=1 and g>0

Differential Savings Rates

Reprise

PART TWO: MONETARY ECONOMIES

10. Money and Inflation

Equilibria with fixed Money Supply

Fiat Money and Other Assets

Inflation

Money Creation and Inflation

Seignorage

Nonoptimality of Seignorage

Reprise

11. Multiple Currencies and Exchange Rates

Independence with Laissez-Faire Floating Rates

Seignorage in a Multiple Money World

Portfolio Autarky Regimes

Reprise

12. Legal Restrictions and Monetary Policy

Comsumption Choice under Credit Controls

Equilibrium Conditions under Credit Controls

Monetary Policy

The Government

Individual Choice with Requirements and No Government Bonds

Equilibrium with Reserve Requirements and No Government Bonds

A Two-Group Example of a Binding Equilibrium

Large Denomination Bonds

Stationary Equilibrium with Large Denomination Bonds

Reprise

References

Index