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Hysteresis in Dynamic General Equilibrium Models with Cash-in-Advance Constraints

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  • Kazuya Kamiya

    (Faculty of Economics, University of Tokyo)

  • Takashi Shimizu

    (Faculty of Economics, Kansai University)

Abstract

In this paper, we investigate equilibrium cycles in dynamic general equilibrium models with cash-in-advance constraints. Our findings are two-fold. First, in such models, if an equilibrium cycle exists, then there also exists a continuum of equilibrium cycles in its neighborhood. Second, the limit cycle, to which a dynamic path converges, varies continuously according to the initial distribution of the money holdings. Thus, temporary shocks that affect the initial distribution have permanent effects in such models; that is, such models exhibit hysteresis. Furthermore, we also explore the logic behind the results.

Suggested Citation

  • Kazuya Kamiya & Takashi Shimizu, 2010. "Hysteresis in Dynamic General Equilibrium Models with Cash-in-Advance Constraints," CIRJE F-Series CIRJE-F-765, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2010cf765
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    References listed on IDEAS

    as
    1. Franz, Wolfgang, 1990. "Hysteresis in Economic Relationships: An Overview," Empirical Economics, Springer, vol. 15(2), pages 109-125.
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    12. Kazuya Kamiya & Takashi Shimizu, 2007. "On The Role Of Tax Subsidy Scheme In Money Search Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 575-606, May.
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