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

Kazuya Kamiya and Takashi Shimizu

No CIRJE-F-765, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

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.

Pages: 37pages
Date: 2010-10
New Economics Papers: this item is included in nep-dge and nep-mac
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Working Paper: Hysteresis in Dynamic General Equilibrium Models with Cash-in-Advance Constraints (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2010cf765

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