On the existence of sunspot equilibria in an overlapping generations model (Q1112712): Difference between revisions

The author proves the existence of sunspot equilibria in a one-commodity overlapping generations model without making stationary assumptions on preferences, endowments or nominal taxes. The crucial assumption he employs is that there is a continuum of perfect foresight equilibria. This seems a useful yet still restrictive assumption. The author also shows that consumption in a sunspot equilibrium lies within the range consistent with perfect foresight. How the model can be extended to the world with more than one commodity per period remains an open question.