Business Cycle Implications of Internal Consumption Habit for New Keynesian Models

Takashi Kano and James Nason

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper studies the implications of internal consumption habit for new Keynesian dynamic stochastic general equilibrium (NKDSGE) models. Bayesian Monte Carlo methods are employed to evaluate NKDSGE model fit. Simulation experiments show that consumption habit often improves the ability of NKDSGE models to match output and consumption growth spectra. Nonetheless, the fit of NKDSGE models with consumption habit is susceptible to the source of the nominal rigidity, to spectra identified by permanent productivity shocks, to the frequencies used for evaluation, and to the choice of monetary policy rule. These vulnerabilities suggest that NKDSGE model specification is fragile.

JEL-codes: E10 E20 E32 (search for similar items in EconPapers)
Pages: 119 pages
Date: 2010-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Business Cycle Implications of Internal Consumption Habit for New Keynesian Models (2014)
Working Paper: Business cycle implications of internal consumption habit for new Keynesian models (2012)
Working Paper: Business Cycle Implications of Internal Consumption Habit for New Keynesian Models (2012)
Working Paper: Business Cycle Implications of Internal Consumption Habit for New Keynesian Model (2009)
Working Paper: Business cycle implications of internal consumption habit for New Keynesian models (2009)
Working Paper: Business Cycle Implications of Internal Consumption Habit for New Keynesian Models (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2010-31

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