In booms, households substitute luxuries for necessities, e.g., food away from home for food at home. Ignoring this cyclical pattern of composition changes in the consumption basket makes the labor-market wedge -- a measure of inefficiency that reflects the gap between the marginal rate of...

In booms, households substitute luxuries for necessities, e.g., food away from home for food at home. This cyclical pattern of composition changes in the consumption basket has the potential to reduce the volatility of measures of the labor-market wedge, the gap between the marginal rate of...

This paper studies the macroeconomic effects of energy price shocks in energy-importing economies using a heterogeneous-agent New Keynesian model. When MPCs are realistically large and the elasticity of substitution between energy and domestic goods is realistically low, increases in energy...