A characterization of erratic dynamics in, the overlapping generations model

Abstract

In this paper we characterize and give examples o(' wide classes of utility functions which generate erratic dynamics in the standard, deterministic, overlapping generations model. Erratic dynamics refers to feasible trajectories which are bounded but which do not converge to stationary points or periodic orbits. We show that such trajectories are Pareto-efficient. We introduce credit into the model and show how a constant credit expansion rate can result in erratic trajectories in prices and the real value of credit. Finally, we briefly discuss certain technical aspects of the mathematics used and the 'statistical' nature of the dynamics that can arise from deterministic dynamical systems.