Dynamics of Economic System with Overlapping- Generation Model

Abstract

This manuscript describes a modern macroeconomic model in discrete time so-called Overlapping-Generation Model. In general, modeling framework of Overlapping-Generation is assumed that each person lives for only two periods, i.e. he/she works in the first period and retires in the second. By maximizing lifetime utility, which depends on consumption in the two periods of life, there will exist a steady state condition. Steady state happens when capital per capita at the first and the second periods are equal. In the end, economics converges to a steady state. Some numerical simulations show the effects of some parameters to the steady state condition.