Credit Frictions and the Comovement between Durable and Non-durable Consumption
AbstractAccording to Monacelli (2009), a standard New-Keynesian model augmented with credit frictions solves the outstanding challenge to generate a joint decline of durable and non-durable consumption during a monetary tightening. This paper shows that his success in generating positive comovement between durables and non-durables is solely due to assumptions about price-stickiness in the durable goods sector and that the introduction of credit frictions actually makes the comovement problem harder to solve
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 210.
Date of creation: Apr 2009
Date of revision:
New-Keynesian models; financial frictions; general equilibrium;
Other versions of this item:
- Sterk, Vincent, 2010. "Credit frictions and the comovement between durable and non-durable consumption," Journal of Monetary Economics, Elsevier, vol. 57(2), pages 217-225, March.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-08 (All new papers)
- NEP-DGE-2009-08-08 (Dynamic General Equilibrium)
- NEP-MAC-2009-08-08 (Macroeconomics)
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