Capital utilization and habit formation in a small open economy model
AbstractThis paper shows the effects of endogenous capital utilization and habit formation in consumption on the predictions of a small open economy model calibrated to Canada. Capital utilization improves the fit of the model by increasing the volatility of output, investment, and hours worked, while habit formation improves the fit of the model by improving the dynamic properties of consumption and the current account. It is also shown that while shocks to the world interest rate sometimes improve the fit of the baseline model, they do not improve the fit of the model with capital utilization and habit formation.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 37 (2004)
Issue (Month): 3 (August)
Contact details of provider:
Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
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- Monteiro, Goncalo & Cook, Adam & Dey, Sanjoy, 2013. "Optimal tax policy under habit formation and capital utilization," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 230-248.
- Shu-Hua Chen, 2012. "On the Growth and Stability Effects of Habit Formation and Durability in Consumption," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 283-298, November.
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- Martin Boileau & Michel Normandin, 2004.
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Cahiers de recherche
- Michel Normandin & Martin Boileau, 2004. "The Current Account and the Interest Differential In Canada," Cahiers de recherche 04-09, HEC Montréal, Institut d'économie appliquée.
- Zuzana Janko, 2008. "Reexamination of Real Business Cycles in A Small Open Economy," Working Papers 2008-15, Department of Economics, University of Calgary, revised 11 Jan 2008.
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