Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/304416 
Year of Publication: 
2024
Series/Report no.: 
Jena Economic Research Papers No. 2024-006
Publisher: 
Friedrich Schiller University Jena, Faculty of Economics and Business Administration, Jena
Abstract: 
We consider a two-agent New Keynesian model with savers and hand-to-mouth households with quasi-separable utility functions as introduced by Bilbiie (2020a). This framework allows for separate parameterization of consumption-hours complementarity and income effects on labor supply. We examine how variations in the size of income effects, the degree of non-separability between consumption and hours worked, and the share of hand-to-mouth households impact aggregate dynamics and determinacy properties of interest rate rules. Complementarity between consumption and hours worked and small income effects can reverse the Taylor principle and result in expansionary monetary contractions.
Subjects: 
Heterogeneity
Monetary policy
Nonseparable preferences
Real indeterminacy
Taylor principle
TANK
JEL: 
E32
E52
E58
E44
E24
Document Type: 
Working Paper

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