Leith, Campbell; Moldovan, Ioana; Rossi, Raffaele - In: Journal of Economic Dynamics and Control 52 (2015) C, pp. 55-74
Allowing habits to be formed at the level of individual goods – deep habits - can radically alter the fiscal policy … policy in our New Keynesian economy subject to the additional externality of deep habits and explore the ability of simple … policy rules to mimic fully optimal policy. We find that the presence of deep habits at empirically estimated levels can …