Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Monetary policy, rule-of-thumb consumers and external habits
T2 - A G7 comparison
AU - Di Bartolomeo, G.
AU - Rossi, L.
AU - Tancioni, M.
PY - 2011
Y1 - 2011
N2 - This article extends the standard New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model to agents who cannot smooth consumption (i.e. spenders) and are affected by external consumption habits. Although these assumptions are not new, their joint consideration strongly affects some theoretical and empirical results addressed by the recent literature. By deriving closed-form solutions, we identify different demand regimes and show that they are characterized by specific features regarding dynamic stability and monetary policy effectiveness. We also evaluate our model by stochastic simulations obtained from the Bayesian parameters estimates for the Group of Seven (G7) economies. From posterior impulse responses, we address the empirical relevance of the different regimes and provide comparative evidence on the heterogeneity of monetary policy effects among countries.
AB - This article extends the standard New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model to agents who cannot smooth consumption (i.e. spenders) and are affected by external consumption habits. Although these assumptions are not new, their joint consideration strongly affects some theoretical and empirical results addressed by the recent literature. By deriving closed-form solutions, we identify different demand regimes and show that they are characterized by specific features regarding dynamic stability and monetary policy effectiveness. We also evaluate our model by stochastic simulations obtained from the Bayesian parameters estimates for the Group of Seven (G7) economies. From posterior impulse responses, we address the empirical relevance of the different regimes and provide comparative evidence on the heterogeneity of monetary policy effects among countries.
KW - Bayesian analysis
KW - consumption behavior
KW - empirical analysis
KW - G-7 country
KW - general equilibrium analysis
KW - Keynesian theory
KW - monetary policy
KW - numerical model
KW - stochasticity
U2 - 10.1080/00036840903357447
DO - 10.1080/00036840903357447
M3 - Journal article
VL - 43
SP - 2721
EP - 2738
JO - Applied Economics
JF - Applied Economics
SN - 0003-6846
IS - 21
ER -