IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v266y2026ics0165176526002260.html

Habit formation and endogenous business cycle

Author

Listed:
  • He, Daxing

Abstract

This paper examines the conditions and mechanisms through which habit formation can generate endogenous business cycles. We integrate habit formation into two canonical preference specifications—multiplicative and additive habits—and show that a period-2 cycle emerges under the multiplicative specification, but not under the additive one. These cyclical dynamics are driven by distant complementarity and the coefficient of relative risk aversion. Within the multiplicative framework, we also derive separate necessary and sufficient conditions for the existence of such cycles.

Suggested Citation

  • He, Daxing, 2026. "Habit formation and endogenous business cycle," Economics Letters, Elsevier, vol. 266(C).
    • Handle: RePEc:eee:ecolet:v:266:y:2026:i:c:s0165176526002260
    DOI: 10.1016/j.econlet.2026.113032
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176526002260
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2026.113032?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:266:y:2026:i:c:s0165176526002260. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.