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Optimal monetary policy in a New Keynesian model with habits in consumption

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Optimal monetary policy in a New Keynesian model with habits in consumption. / Leith, Campbell; Moldovan, Ioana; Rossi, Raffaele.
In: Review of Economic Dynamics, Vol. 15, No. 3, 07.2012, p. 416-435.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Leith, C, Moldovan, I & Rossi, R 2012, 'Optimal monetary policy in a New Keynesian model with habits in consumption', Review of Economic Dynamics, vol. 15, no. 3, pp. 416-435. https://doi.org/10.1016/j.red.2012.03.001

APA

Leith, C., Moldovan, I., & Rossi, R. (2012). Optimal monetary policy in a New Keynesian model with habits in consumption. Review of Economic Dynamics, 15(3), 416-435. https://doi.org/10.1016/j.red.2012.03.001

Vancouver

Leith C, Moldovan I, Rossi R. Optimal monetary policy in a New Keynesian model with habits in consumption. Review of Economic Dynamics. 2012 Jul;15(3):416-435. doi: 10.1016/j.red.2012.03.001

Author

Leith, Campbell ; Moldovan, Ioana ; Rossi, Raffaele. / Optimal monetary policy in a New Keynesian model with habits in consumption. In: Review of Economic Dynamics. 2012 ; Vol. 15, No. 3. pp. 416-435.

Bibtex

@article{9f5f9810954e48a18985b8b6f8a98942,
title = "Optimal monetary policy in a New Keynesian model with habits in consumption",
abstract = "In this paper we consider the implications of habits for optimal monetary policy, when those habits either exist at the level of the aggregate basket of consumption goods ({\textquoteleft}superficial{\textquoteright} habits) or at the level of individual goods ({\textquoteleft}deep{\textquoteright} habits: see Ravn et al., 2006). External habits generate an additional distortion in the economy and create new trade-offs for optimal policy, as the policy maker does not respond as aggressively to technology shocks in order to avoid exacerbating the habits externality. This can dramatically affect both the parameterization of optimal simple rules, as well as their determinacy properties. These effects are particularly strong when habits are of the deep kind.",
keywords = "Consumption habits, Nominal inertia, Optimal monetary policy",
author = "Campbell Leith and Ioana Moldovan and Raffaele Rossi",
year = "2012",
month = jul,
doi = "10.1016/j.red.2012.03.001",
language = "English",
volume = "15",
pages = "416--435",
journal = "Review of Economic Dynamics",
issn = "1094-2025",
publisher = "Academic Press Inc.",
number = "3",

}

RIS

TY - JOUR

T1 - Optimal monetary policy in a New Keynesian model with habits in consumption

AU - Leith, Campbell

AU - Moldovan, Ioana

AU - Rossi, Raffaele

PY - 2012/7

Y1 - 2012/7

N2 - In this paper we consider the implications of habits for optimal monetary policy, when those habits either exist at the level of the aggregate basket of consumption goods (‘superficial’ habits) or at the level of individual goods (‘deep’ habits: see Ravn et al., 2006). External habits generate an additional distortion in the economy and create new trade-offs for optimal policy, as the policy maker does not respond as aggressively to technology shocks in order to avoid exacerbating the habits externality. This can dramatically affect both the parameterization of optimal simple rules, as well as their determinacy properties. These effects are particularly strong when habits are of the deep kind.

AB - In this paper we consider the implications of habits for optimal monetary policy, when those habits either exist at the level of the aggregate basket of consumption goods (‘superficial’ habits) or at the level of individual goods (‘deep’ habits: see Ravn et al., 2006). External habits generate an additional distortion in the economy and create new trade-offs for optimal policy, as the policy maker does not respond as aggressively to technology shocks in order to avoid exacerbating the habits externality. This can dramatically affect both the parameterization of optimal simple rules, as well as their determinacy properties. These effects are particularly strong when habits are of the deep kind.

KW - Consumption habits

KW - Nominal inertia

KW - Optimal monetary policy

U2 - 10.1016/j.red.2012.03.001

DO - 10.1016/j.red.2012.03.001

M3 - Journal article

VL - 15

SP - 416

EP - 435

JO - Review of Economic Dynamics

JF - Review of Economic Dynamics

SN - 1094-2025

IS - 3

ER -