Chaotic dynamics in a monetary economy with habit persistence

Hung Ju Chen*, Ming-Chia Li

*Corresponding author for this work

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

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.

Original languageEnglish
Pages (from-to)245-260
Number of pages16
JournalJournal of Economic Behavior and Organization
Volume65
Issue number2
DOIs
StatePublished - 1 Feb 2008

Keywords

  • Cash-in-advance economy
  • Chaos
  • Habit persistence

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