We estimate the degree of "stickiness" in aggregate consumption growth (sometimes interpreted as reflecting consumption habits) for thirteen advanced economies. We find that, after controlling for measurement error, consumption growth has a high degree of autocorrelation, with a stickiness...

Macroeconomic models often invoke consumption "habits" to explain the substantial persistence of macroeconomic consumption growth. But a large literature has found no evidence of habits in the microeconomic datasets that measure the behavior of individual households. We show that the apparent...

We propose a theoretical framework to reconcile episodes of V-shaped and L-shaped recovery, en- compassing the behaviour of the U.S. economy before and after the Great Recession. In a DSGE model with endogenous growth, negative demand shocks destroy productive capacity, moving GDP to a lower...

This paper analyses how labour market heterogeneity affects unemployment, productivity and business cycle dynamics that are relevant for monetary policy. The model matches remarkably well the short and long run dynamics of skilled and unskilled workers. Skill mismatch and skill-specific labour...

Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity...

Members of the US House of Representatives have proposed a major overhaul of the US corporate tax system, the so-called "destination-based border-adjusted cash-flow tax" (DBCFT). The literature on the economic implications and spillovers of such a DBCFT is scarce. This paper aims to provide a...