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Some Foundations for Multiplicative Habits Models

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  • Ryoji Hiraguchi

Abstract

While consumption models with multiplicative habits are becoming increasingly popular, some important theoretical questions about these models have not yet been addressed. This paper fills three such gaps: Existence of an optimal consumption path; satisfaction, by that path, of the consumption Euler equation; and convergence of that path to the stationary (steady state) path.

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Bibliographic Info

Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 516.

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Date of creation: Sep 2004
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Handle: RePEc:jhu:papers:516

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  1. Christopher D Carroll, 2000. "Solving Consumption Models with Multiplicative Habits," Economics Working Paper Archive 421, The Johns Hopkins University,Department of Economics.
  2. Christopher D. Carroll & Jody Overland & David N. Weil, 1995. "Saving and growth with habit formation," Finance and Economics Discussion Series 95-42, Board of Governors of the Federal Reserve System (U.S.).
  3. Alonso-Carrera, Jaime & Caballe, Jordi & Raurich, Xavier, 2005. "Growth, habit formation, and catching-up with the Joneses," European Economic Review, Elsevier, vol. 49(6), pages 1665-1691, August.
  4. Carroll, Christopher D & Overland, Jody & Weil, David N, 1997. " Comparison Utility in a Growth Model," Journal of Economic Growth, Springer, vol. 2(4), pages 339-67, December.
  5. Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen Turnovsky, 2004. "Habit Formation, Catching Up with the Joneses, and Economic Growth," Working Papers UWEC-2004-09-P, University of Washington, Department of Economics, revised Jan 2004.
  6. Takashi Kamihigashi, 2002. "A simple proof of the necessity of the transversality condition," Economic Theory, Springer, vol. 20(2), pages 427-433.
  7. Nishimura, Kazuo, 1985. "Competitive equilibrium cycles," Journal of Economic Theory, Elsevier, vol. 35(2), pages 284-306, August.
  8. Juan Pablo RincÛn-Zapatero & Carlos RodrÌguez-Palmero, 2003. "Existence and Uniqueness of Solutions to the Bellman Equation in the Unbounded Case," Econometrica, Econometric Society, vol. 71(5), pages 1519-1555, 09.
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Citations

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Cited by:
  1. 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.
  2. Manuel Gómez, 2010. "A note on external habits and efficiency in the AK model," Journal of Economics, Springer, vol. 99(1), pages 53-64, February.
  3. Hiraguchi, Ryoji, 2011. "A two sector endogenous growth model with habit formation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 430-441, April.
  4. Gomez Suarez, Manuel A., 2008. "Utility and production externalities, equilibrium efficiency and leisure specification," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1496-1519, December.

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