Consumption Habits in a New Keynesian Business Cycle Model

Richard Dennis

Journal of Money, Credit and Banking, 2009, vol. 41, issue 5, 1015-1030

Abstract: 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.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
https://doi.org/10.1111/j.1538-4616.2009.00242.x

Related works:
Journal Article: Consumption Habits in a New Keynesian Business Cycle Model (2009)
Working Paper: Consumption-habits in a new Keynesian business cycle model (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:41:y:2009:i:5:p:1015-1030

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().