Habit Persistence and Beliefs Based Liquidity Effect
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.
Volume (Year): 5 (2002)
Issue (Month): 2 ()
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