Habit Persistence and Beliefs Based Liquidity Effect

Patrick Fève, Fabrice Collard and Stéphane Auray

Economics Bulletin, 2002, vol. 5, issue 2, 1-7

Abstract: The paper introduces habit persistence in consumption decisions in an infinitely-lived agents monetary model with a cash-in-advance constraint. We show that strong enough habit persistence yields indeterminate equilibria. However, real indeterminacy is not per se sufficient to obtain a liquidity effect. The form of the beliefs matters.

JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2002-03-29
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Citations: View citations in EconPapers (2)

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