Short-memory equilibrium in stochastic overlapping generations economies

Alessandro Citanna, Paolo Siconolfi

Research output: Contribution to journalArticlepeer-review


In stochastic OLG exchange economies, we show that short-memory equilibria-the natural extension from deterministic economies of steady states, low-order cycles, or finite state-space stationary sunspots equilibria-fail to exist generically in utilities. As a result, even with independent and identically distributed exogenous shocks there is serial correlation in endogenous economic variables in equilibrium. This arises even if utilities are time-separable, some goods inferior, and there are no technological lags. Hence, the origins of economic fluctuations can be traced only to the demographic structure of a heterogeneous agent, multiple-good economy.

Original languageEnglish (US)
Pages (from-to)448-469
Number of pages22
JournalJournal of Economic Theory
Issue number1
StatePublished - May 2007


  • Equilibrium
  • Overlapping generations
  • Real business cycle

ASJC Scopus subject areas

  • Economics and Econometrics


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