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Habit persistence, money, and overlapping generations

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  • Bunzel, Helle

Abstract

This paper provides a comprehensive characterization of the stationary and non-stationary monetary equilibria in a two-period pure exchange overlapping generations model with multiplicative habit persistence preferences. Somewhat surprisingly, the upshot is that multiplicative habit persistence preferences do not affect the qualitative properties of the dynamical system in these models. In addition, the qualitative properties of models with subtractive and multiplicative habits are largely similar. Any possibility of cyclical fluctuations beyond periodicity two is also ruled out.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 30 (2006)
Issue (Month): 12 (December)
Pages: 2425-2445

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Handle: RePEc:eee:dyncon:v:30:y:2006:i:12:p:2425-2445

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  1. Bullard, James & Duffy, John, 1998. "Learning And The Stability Of Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 2(01), pages 22-48, March.
  2. Boldrin, Michele & Woodford, Michael, 1990. "Equilibrium models displaying endogenous fluctuations and chaos : A survey," Journal of Monetary Economics, Elsevier, vol. 25(2), pages 189-222, March.
  3. Lahiri, Amartya & Puhakka, Mikko, 1998. "Habit Persistence in Overlapping Generations Economies under Pure Exchange," Journal of Economic Theory, Elsevier, vol. 78(1), pages 176-186, January.
  4. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
  5. Smith, Bruce D, 1991. "Interest on Reserves and Sunspot Equilibria: Friedman's Proposal Reconsidered," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 93-105, January.
  6. Bhattacharya, Joydeep & Russell, Steven, 2002. "Two-Period Cycles in a Three-Period Overlapping Generations Model," Staff General Research Papers 10250, Iowa State University, Department of Economics.
  7. Chang, Winston W & Kemp, Murray C & Long, Ngo Van, 1983. "Dynamic Properties of a Simple Overlapping-Generations Model," Oxford Economic Papers, Oxford University Press, vol. 35(3), pages 366-72, November.
  8. Reichlin Pietro, 1997. "Endogenous Cycles in Competitive Models: An Overview," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(4), pages 1-13, January.
  9. Christopher D Carroll, 2000. "Solving Consumption Models with Multiplicative Habits," Economics Working Paper Archive 421, The Johns Hopkins University,Department of Economics.
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Citations

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Cited by:
  1. Luca Bossi & Pere Gomis-Porqueras, 2008. "Consequences of Modeling Habit Persistence," Working Papers 0701, University of Miami, Department of Economics.
  2. Barnett, Richard C. & Bhattacharya, Joydeep, 2006. "Rejuveniles and Growth," Staff General Research Papers 12653, Iowa State University, Department of Economics.
  3. Dimitrios Varvarigos, 2013. "Endogenous Cycles and Human Capital," Discussion Papers in Economics 13/18, Department of Economics, University of Leicester.
  4. Gómez Manuel A., 2010. "Endogenous Growth, Habit Formation and Convergence Speed," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-32, January.
  5. Gori, Luca & Sodini, Mauro, 2012. "Indeterminacy and nonlinear dynamics in an OLG growth model with endogenous labour supply and inherited tastes," MPRA Paper 35942, University Library of Munich, Germany.
  6. Fabrizio Orrego, 2014. "Habit formation and indeterminacy in overlapping generations models," Economic Theory, Springer, vol. 55(1), pages 225-241, January.
  7. Barnett, Richard C. & Bhattacharya, Joydeep & Bunzel, Helle, 2010. "Resurrecting Equilibria Through Cycles in an Overlapping Generations Model of Money," Staff General Research Papers 32099, Iowa State University, Department of Economics.
  8. Hiraguchi, Ryoji, 2008. "The overlapping generations model with habit formation: A comment," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 4016-4017, December.
  9. Richard C. Barnett & Joydeep Bhattacharya & Helle Bunzel, 2007. "Resurrecting Equilibria Through Cycles," Economics Working Papers 2007-12, School of Economics and Management, University of Aarhus.
  10. Ahmad Naimzada & Marina Pireddu, 2013. "A positional game for an overlapping generation economy," Working Papers 247, University of Milano-Bicocca, Department of Economics, revised Jun 2013.
  11. Barnett, Richard C. & Bhattacharya, Joydeep & Bunzel, Helle, 2007. "Minimum Consumption Requirements and Cycles in an Overlapping Generations Model of Money," Staff General Research Papers 12834, Iowa State University, Department of Economics.

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