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Consumption Habits in a New Keynesian Business Cycle Model Author info | Abstract | Publisher info | Download info | Related research | Statistics RICHARD DENNIS
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Consumption habits have become an integral component in new Keynesian models. However, consumption habits can be modeled in a host of different ways and this diversity is reflected in the literature. I examine whether different approaches to modeling consumption habits have important implications for business cycle behavior. Using a standard New Keynesian business cycle model, I show that, to a first-order log-approximation, the consumption Euler equation associated with the additive functional form for habit formation encompasses the multiplicative function form. Empirically, I show that whether consumption habits are internal or external has little effect on the model's business cycle characteristics. Copyright (c) 2009 The Ohio State University.
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking .
Volume (Year): 41 (2009)
Issue (Month): 5 (08)
Pages: 1015-1030
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Handle: RePEc:mcb:jmoncb:v:41:y:2009:i:5:p:1015-1030Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Richard Dennis, 2008.
"The Frequency Of Price Adjustment And New Keynesian Business Cycle Dynamics ,"
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2008-19, Australian National University, Centre for Applied Macroeconomic Analysis.
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Other versions: Takashi Kano & James M. Nason, 2009.
"Business cycle implications of internal consumption habit for New Keynesian models ,"
Working Paper
2009-16, Federal Reserve Bank of Atlanta.
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