Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70684
Authors: 
Kano, Takashi
Nason, James Michael
Year of Publication: 
2009
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2009-16
Abstract: 
This paper studies the implications of internal consumption habit for propagation and monetary transmission in New Keynesian dynamic stochastic general equilibrium (NKDSGE) models. We use Bayesian methods to evaluate the role of internal consumption habit in NKDSGE model propagation and monetary transmission. Simulation experiments show that internal consumption habit often improves NKDSGE model fit to output and consumption growth spectra by dampening business cycle periodicity. Nonetheless, habit NKDSGE model fit is vulnerable to nominal rigidity, the choice of monetary policy rule, the frequencies used for evaluation, and spectra identified by permanent productivity shocks.
Subjects: 
habit
New Keynesian
propagation
monetary transmission
Bayesian Monte Carlo
JEL: 
E10
E20
E32
Document Type: 
Working Paper

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