Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/213830
Authors: 
Massenot, Baptiste
Year of Publication: 
2020
Series/Report no.: 
SAFE Working Paper 194
Abstract: 
Motivated by the consumer behavior literature, this paper presents a new business cycle model in which consumers incur a pain of paying and neglect the opportunity costs of consumption. The model has a unique equilibrium and can be easily solved in closed form. Although consumers maximize their utility and have perfect foresight, there is no Euler equation. Several New Keynesian puzzles disappear as a result: negative supply shocks do not stimulate the economy, lower interest rates are not deflationary, and forward guidance is not overly powerful.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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