The overlapping generations model with habit formation: A comment

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.