Dynamics in an OLG model with non-separable preferences

This paper presents sufficient conditions for existence and uniqueness of a steady state equilibrium in an OLG model with non separable preferences and analyzes the implications of such assumption for the local stability of the steady state equilibrium. The conditions for a stable solution are derived under the assumption that habits are transmitted both across and within generations. Under this assumption, monotonic convergence to the steady state is not always assured. Both competitive and optimal equilibrium may display explosive dynamics.