Leith, Campbell; Moldovan, Ioana; Rossi, Raffaele - Scottish Institute for Research in Economics (SIRE) - 2008
While consumption habits have been utilised as a means of generating a humpshaped output response to monetary policy shocks in sticky-price New Keynesian economies, there is relatively little analysis of the impact of habits (particularly,external habits) on optimal policy. In this paper we...