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The overlapping generations model with habit formation: A comment

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  • Hiraguchi, Ryoji

Abstract

Bunzel [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.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:dyncon:v:32:y:2008:i:12:p:4016-4017
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    References listed on IDEAS

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    1. 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.
    2. Bunzel, Helle, 2006. "Habit persistence, money, and overlapping generations," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2425-2445, December.
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    Cited by:

    1. Masako Ikefuji & Kazuo Mino, 2009. "Internal vs. External Habit Formation in a Growing Economy with Overlapping Generations," KIER Working Papers 676, Kyoto University, Institute of Economic Research.

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