Habit Persistence and Beliefs Based Liquidity Effect

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.

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Year of publication:	2002
Authors:	Fève, Patrick ; Collard, Fabrice ; Auray, Stéphane
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 5.2002, 2, p. 1-7
Publisher:	AccessEcon

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Classification:	E4 - Money and Interest Rates ; E5 - Monetary Policy, Central Banking and the Supply of Money and Credit
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008556070