A BENCHMARK FOR COMPARATIVE DYNAMICS AND DETERMINACY IN OVERLAPPING-GENERATIONS ECONOMIES

Do self-fulfilling prophecies inherently produce indeterminate price paths? After attention is restricted to nearly stationary price paths and economies, the local uniqueness of equilibrium paths is established for almost all eternal (without beginning or end) overlapping-generations economies with perfect foresight. Those results sharply contrast with leading examples of indeterminacy. Such divergent results are possible since each leading example actually violates perfect foresight: all but a finite number of their equilibrium paths embody either unanticipated revisions of expectations or extrinsic uncertainty (sunspots). © 1990.