The overlapping generations model with habit formation: A comment

Ryoji Hiraguchi ()

Journal of Economic Dynamics and Control, 2008, vol. 32, issue 12, 4016-4017

Abstract: Bunzel [2006. Habit persistence, money, and overlapping generations. Journal of Economic Dynamics and Control 30, 2425-2445] studies an overlapping generations model with habit formation. This comment argues that the interior paths analyzed in Propositions 4 and 5 from that paper are not global maxima. Specifically, if the coefficient of relative risk aversion is less than one, a corner solution is optimal. This correction, however, does not change Bunzel's conclusion, ruling out the possibility of higher order fluctuations.

Keywords: Habit; formation; Money (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:32:y:2008:i:12:p:4016-4017

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