Business Cycles in a Habit Formation Monetary Model

Yongseung Jung
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Yongseung Jung: Korea Institute for Industrial Economoics and Trade

Korean Economic Review, 1999, vol. 15, 101-121

Abstract: This paper sets up a habit persistence monetary model in line with Campbell and Cochrane(1995) with transaction costs in consumption. It compares the quantitative properties of the habit formation model with data. It shows that the habit persistence model fails to explain the interest rate and employment fluctuations as well as the movement of consumption due to a locally large value of relative risk aversion.

Keywords: Consumption Variability; Habit Formation; Monetary Business Cycle (search for similar items in EconPapers)
JEL-codes: E32 E49 (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:kea:keappr:ker-199906-15-1-06

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