Habit formation, asymmetric price adjustment, and real exchange rate persistence

Title
Habit formation, asymmetric price adjustment, and real exchange rate persistence
Authors
남덕우
Keywords
habit formation; real exchange rate persistence; closedeconomy output gap persistence; PPP puzzle
Issue Date
2015-05
Publisher
한양대학교 경제연구소/아태경제학회
Citation
Journal of Economic Research (JER), v. 20, NO 1, Page. 83-116
Abstract
This paper studies the eect of habit formation in consumption on the real exchange persistence under monetary policy shocks. Closed economy models of monetary policy have emphasized the ability of habit formation to generate endogenous persistence, which has encouraged the open economy literature to incorporate habit formation into theoretical models to generate greater persistence in the real exchange rate. However, there has not yet been a thorough evaluation of the habit formation eect in the real exchange rate context. By incorporating habit formation into the model of Benigno (2004), it is shown that the habit formation eect depends on the degree of price stickiness assumed within and across countries as well as the design of the monetary policy rule. Habit formation does not aect the dynamics of the real exchange rate under symmetric price adjustment and does not signicantly contribute to the persistence of the real exchange rate for more general cases.
URI
http://www.kci.go.kr/kciportal/landing/article.kci?arti_id=ART001993317http://hdl.handle.net/20.500.11754/24388
ISSN
1226-4261
DOI
http://dx.doi.org/10.17256/jer.2015.20.1.005
Appears in Collections:
COLLEGE OF ECONOMICS AND FINANCE[S](경제금융대학) > ECONOMICS & FINANCE(경제금융학부) > Articles
Files in This Item:
Habit formation, asymmetric price adjustment, and real exchange rate persistence.pdfDownload
Export
RIS (EndNote)
XLS (Excel)
XML


qrcode

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.

BROWSE