We study relative preferences in a general equilibrium model where households make social comparisons and/or get habituated to levels of labour-effort they supply and goods they consume. Bayesian estimations for the US support the existence of a society based on such preferences. In particular,...

We apply an optimizing model with relative comparisons (habit formation) in consumption and labour supply to the economics of happiness, specifically the 'Easterlin paradox'. Studying a generalization of the paradox, which we label the 'happiness puzzle', we analyse ways in which income growth...

A stable relationship between monetary policy rates and bank lending and deposit rates faced by consumers and companies is essential for the effective transmission of monetary policy decisions. This paper studies how changes in the policy rate set by the Swedish central bank, the Riksbank, have...

This paper contributes to the recent debate about the estimated high partial adjustment coefficient in dynamic Taylor rules, commonly interpreted as deliberate interest rate smoothing on the part of the monetary authority. We argue that a high coefficient on the lagged interest rate term may be...

The strong response of long-term interest rates to macroeconomic shocks has typically been explained in terms of informational asymmetries between the central bank and private agents. The standard models assume that the equilibrium real interest rate is constant over time and independent of...