Solving consumption models with multiplicative habits

Asset Prices Under Non-Additive Habits

We explore the asset pricing implications of a RBC model with capital adjustment costs and multiplicative habits in the utility function. The model is consistent with a set of financial regularities that can not be accounted for by standard consumption-based models. It generates the observed equity premium and the market price of risk. It also reproduces the leading countercyclical and lagging ...

Solving Consumption Models with Habits

Invariant functions for solving multiplicative discrete and continuous ordinary differential equations

In this paper, at first the elemantary and basic concepts of multiplicative discrete and continous differentian and integration introduced. Then for these kinds of differentiation invariant functions the general solution of discrete and continous multiplicative differential equations will be given. Finaly a vast class of difference equations with variable coefficients and nonlinear difference e...

An Analysis Of Energy Consumption In Transportation And Industrial Sectors- A Multiplicative LMDI Approach With Application To Iran

Solving Consumption Models with Habit Formation

The intuition for this equation is as follows. If λ, the parameter which controls how fast habits catch up with consumption, is equal to zero equation (6) reduces to the normal first order condition for the standard consumption optimization problem, which tells us that increasing consumption by today and reducing it by R in the next period must not change expected discounted utility. If λ is no...