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Studies in Economic Theory
We study a two-sector OLG economy in which a share of old age consumption expenditures must be paid out of money balances and we appraise its dynamic features. We first show that competitive equilibrium is dynamically efficient if and only if the share of capital on total income is large enough while a steady state capital per capita above its Golden Rule level is not consistent with a binding liquidity constraint. We thus focus on the gross substitutability in consumption and on dynamicdoi:10.1007/978-3-319-44076-7_7 fatcat:3f7f44g73veujhvkga6m5xpdce