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Some Foundations for Multiplicative Habits Models

  • Ryoji Hiraguchi

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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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
Date of revision:
Handle: RePEc:jhu:papers:516
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  1. Carroll, Christopher D., 2000. "Solving consumption models with multiplicative habits," Economics Letters, Elsevier, vol. 68(1), pages 67-77, July.
  2. Takashi Kamihigashi, 2002. "A simple proof of the necessity of the transversality condition," Economic Theory, Springer, vol. 20(2), pages 427-433.
  3. Nishimura, Kazuo, 1985. "Competitive equilibrium cycles," Journal of Economic Theory, Elsevier, vol. 35(2), pages 284-306, August.
  4. Christopher D. Carroll & Jody Overland & David N. Weil, 1997. "Comparison Utility in a Growth Model," NBER Working Papers 6138, National Bureau of Economic Research, Inc.
  5. 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.
  6. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
  7. 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.
  8. Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen J. Turnovsky, 2004. "Habit Formation, Catching Up with the Joneses, and Economic Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 47-80, 03.
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