Habit Persistence and Beliefs Based Liquidity Effect

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Habit Persistence and Beliefs Based Liquidity Effect

Author Info

Stéphane Auray () (University of Nantes, LEN-C3E and GREMAQ)
Fabrice Collard () (University of Toulouse (GREMAQ-CNRS and IDEI))
Patrick Fève () (University of Toulouse (GREMAQ-CNRS and IDEI))

Additional information is available for the following registered author(s):

Abstract

The paper introduces habit persistence in consumption decisions in an infinitely-lived agents monetary model with a cash-in-advance constraint. We show that strong enough habit persistence yields indeterminate equilibria. However, real indeterminacy is not per se sufficient to obtain a liquidity effect. The form of the beliefs matters.

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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 5 (2002)
Issue (Month): ()
Pages: 1-7
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Handle: RePEc:ebl:ecbull:eb-02e40002

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Find related papers by JEL classification:
E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Naik, Narayan Y & Moore, Michael J, 1996. "Habit Formation and Intertemporal Substitution in Individual Food Consumption," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 321-28, May. [Downloadable!] (restricted)
Charles T. Carlstrom & Timothy S. Fuerst, 2000. "Money growth rules and price level determinacy," Working Paper 0010, Federal Reserve Bank of Cleveland. [Downloadable!]
Other versions:
- Charles T. Carlstrom & Timothy S. Fuerst, 2003. "Money Growth Rules and Price Level Determinacy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 263-275, April. [Downloadable!] (restricted)
Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April. [Downloadable!] (restricted)
Kenneth J. Matheny, 1998. "Non-neutral responses to money supply shocks when consumption and leisure are Pareto substitutes," Economic Theory, Springer, vol. 11(2), pages 379-402. [Downloadable!] (restricted)
Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier. [Downloadable!] (restricted)
Other versions:
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
- Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Jess Benhabib & Roger E.A. Farmer, 2000. "The Monetary Transmission Mechanism," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 523-550, July. [Downloadable!] (restricted)
Other versions:
- Benhabib, J. & Farmer, R.E.A., 1999. "The Monetary Transmission Mechanism," Economics Working Papers eco99/35, European University Institute.
- Jess Benhabib & Roger Farmer, 1998. "The Monetary Transmission Mechanism," Levine's Working Paper Archive 2055, UCLA Department of Economics. [Downloadable!]
- Benhabib, Jess & Farmer, Roger E A, 1996. "The Monetary Transmission Mechanism," CEPR Discussion Papers 1404, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Benhabib, J. & Farmer, R.E.A., 1996. "The Monetary Transmission Mechanism," Working Papers 96-13, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Michael Gail, 2003. "Habit Persistence in Consumption in a Sticky Price Model of the Business Cycle," Volkswirtschaftliche Diskussionsbeitraege 111-03, Universitaet Siegen, Fachbereich Wirtschaftswissenschaften, revised Jul 2004. [Downloadable!]
Other versions:
- Michael Gail, 2004. "Habit Persistence in Consumption in a Sticky Price Model of the Business Cycle," Computing in Economics and Finance 2004 189, Society for Computational Economics. [Downloadable!]

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