On the existence of sunspot equilibria in an overlapping generations model

Abstract

The existence of sunspot equilibria is shown in a one-commodity overlapping generations model without stationarity assumptions on preferences, endowments, or nominal taxes. The essential assumption is that there is a continuum of perfect foresight equilibria. The technique is also useful for constructing stationary sunspot equilibria when they exist. Consumption in a sunspot equilibrium is shown to lie within the range consistent with perfect foresight. © 1988.