This paper develops a cash-in-advance model for persistent habits of consumption. With a binding cash-in-advance constraint, the economic transition can be represented by a one-dimensional or two-dimensional dynamical system, depending on persistent habits of only cash-goods consumption or both cash-goods and credit-goods consumption, respectively. We verify the existence of entropic chaos and ergodic chaos for the former case and identify the presence of entropic chaos for the latter.
- Cash-in-advance economy
- Habit persistence