Ravn, Morten O.; Schmitt-Grohe, Stephanie; Uribe, Martín; … - Department of Economics, European University Institute - 2008
This paper introduces deep habits into a sticky-price sticky-wage economy and asks whether the countercyclical markup … movements induced by deep habits is helpful for accounting for the dynamic effects of monetary policy shocks. We find that this … is the case: When allowing for deep habits, the model can account very precisely for the persistent impact of monetary …