Content deleted Content added
Clarification of "infinite": not at any given time, but summed over time. |
→Basic model: ce |
||
Line 15:
The most basic OLG model has the following characteristics:<ref name="LjungqvistSargent2004">{{cite book|author1=Lars Ljungqvist|author2=Thomas J. Sargent|title=Recursive Macroeconomic Theory|accessdate=13 May 2012|date=1 September 2004|publisher=MIT Press|isbn=978-0-262-12274-0|pages = 264–267}}</ref>
*Individuals live for '''two''' periods; in the first period of life, they are referred to as the '''Young'''. In the second period of life, they are referred to as the '''Old'''.
*A number of individuals is born in every period.''N'' <sup>t</sup><sub>t</sub> denotes the number of individuals born in period t.
*''N'' <sup>t-1</sup><sub>t</sub> denotes the number of old people in period t. Since the economy begins in period 1
*The size of the initial old generation is normalized to 1
*People do not die early, so ''N''<sup> t</sup><sub>t</sub> = ''N''<sup> t</sup><sub>t+1</sub>.
*Population grows at a constant rate n:
::<math> N_t^t = (1+n)^t </math>
Line 26:
*Preferences over consumption streams are given by
::<math> u(c_t^t,c_t^{t+1}) = U(c_t^t) + \beta U(c_t^{t+1}),</math>
:where <math> \beta </math> is the rate of time preference.
==Attributes==
| |||