NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Role of Overlapping-Generations Models in Monetary Economics

Bennett T. McCallum

NBER Working Paper No. 989 (Also Reprint No. r0463)
Issued in September 1982
NBER Program(s):   EFG

The main arguments of this paper can be summarized as follows. (1) The overlapping-generations (OG) structure provides a useful framework for the analysis of macroeconomic issues involving intertemporal allocation. (2) As a "model of money," the basic OG setup -- which excludes cash-in-advance or money-in-the-utility-function (MIUF) features -- is inadequate and misleading because it neglects the medium-of-exchange property that is the distinguishing characteristic of money. (3) That this neglect obtains is verified by noting that, in contrast with an axiomatic "traditional presumption," the same aggregate leisure/consumption bundles are available in equilibria in which "money" is valued and valueless. (4) That the model may be misleading is demonstrated by examples in which three of its most striking properties --tenuousness of monetary equilibrium, optimality of zero money growth, and price level invariance to open-market exchanges -- disappear in the presence of modifications designed to reflect the medium-of-exchange property. (5) There is no compelling reason why cash-in-advance, MIUF, or other appendages should not be used in conjunction with the OG framework.

download in pdf format
   (516 K)

email paper

This paper is available as PDF (516 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0989

Published: Carnegie-Rochester Conference Series on Public Policy, edited by Karl Brunner and Allan H. Meltzer, Vol. 18, pp. 9-44, (Spring 1983). Amsterdam: North-Holland Publishing Co.

Users who downloaded this paper also downloaded these:
McCallum and Goodfriend w2157 Money: Theoretical Analysis of the Demand for Money
McCallum w1892 The Optimal Inflation Rate in an Overlapping-Generations Economy with Land
Buiter w0352 Time Preference and International Lending and Borrowing in an Overlapping-Generations Model
Bajona and Kehoe w12566 Demographics in Dynamic Heckscher-Ohlin Models: Overlapping Generations Versus Infinitely Lived Consumers
Barro w0883 Measuring the Fed's Revenue from Money Creation
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us