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Habit formation and chaotic dynamics in an n-dimensional cash-in-advance economy

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Abstract

This paper investigates the global dynamics of an n-dimensional cash-in-advance model where external habits persist for n periods. We find that habit formation is an important determinant to the dynamic property of the economy and identifies conditions generating entropic chaos. Our results indicate that the possibility of chaotic motion increases with the depreciation rate of habits.

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Authors and Affiliations

  1. Department of Economics, National Taiwan University, 21 Hsu-Chow Road, Taipei, 100, Taiwan

    Hung-Ju Chen

  2. Department of Applied Mathematics, National Chiao Tung University, Hsinchu, 300, Taiwan

    Ming-Chia Li

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  1. Hung-Ju Chen
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  2. Ming-Chia Li
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Correspondence to Hung-Ju Chen.

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Chen, HJ., Li, MC. Habit formation and chaotic dynamics in an n-dimensional cash-in-advance economy. Nonlinear Dyn 58, 49–62 (2009). https://doi.org/10.1007/s11071-008-9460-1

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  • DOI: https://doi.org/10.1007/s11071-008-9460-1

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