The overlapping generations model with habit formation: A comment
AbstractBunzel [2006. Habit persistence, money, and overlapping generations. Journal of Economic Dynamics and Control 30, 2425-2445] studies an overlapping generations model with habit formation. This comment argues that the interior paths analyzed in Propositions 4 and 5 from that paper are not global maxima. Specifically, if the coefficient of relative risk aversion is less than one, a corner solution is optimal. This correction, however, does not change Bunzel's conclusion, ruling out the possibility of higher order fluctuations.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 32 (2008)
Issue (Month): 12 (December)
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Web page: http://www.elsevier.com/locate/jedc
Habit formation Money;
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