Modeling Monetary Economies

📋 Course Outline

1. Overlapping Generations Framework
2. Endowments and Nonstorable Goods
3. Intertemporal Preferences
4. Preference Consistency and Initial Old
5. Planner Feasibility Constraints
6. Golden Rule Allocation

📖 1. Overlapping Generations Framework

🔑 Key Concepts & Definitions

• Overlapping Generations Economy : Paul Samuelson, 1958 — an economy in which young and old individuals coexist in the same period

★ Must-know

• Individuals live for two periods, first as young and then as old.

• For every period t ≥ 1, Nt agents are born, become young in period t, and become old in period t+1.

Further detail

• At t = 1, N0 initial old individuals live for only one period.

💡 Memory Hook

A red young generation overlaps a black old generation in every period.

📖 2. Endowments and Nonstorable Goods

🔑 Key Concepts & Definitions

• Endowment : Each individual receives y consumption goods when young and nothing when old

📝 Essential Points

• In each period, the economy contains Nt young people and Nt−1 old people.

📌 The single consumption good cannot be stored from one period to the next.