Credit Frictions and the Comovement between Durable and Non-durable Consumption
DNB Working Papers from Netherlands Central Bank, Research Department
According 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
Keywords: New-Keynesian models; financial frictions; general equilibrium (search for similar items in EconPapers)
JEL-codes: E44 E52 (search for similar items in EconPapers)
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Journal Article: Credit frictions and the comovement between durable and non-durable consumption (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:210
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