TITLE:
The New Open Economy Macroeconomics of Working Habits
AUTHORS:
Yunqing Wang, Qianwen Liu, Bayi Guan, Xinyu Sui
KEYWORDS:
Working Habits, New Open Economy Macroeconomics, Monetary and Fiscal Policy
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.1,
February
15,
2015
ABSTRACT: This paper develops a
new open economy macroeconomics model by allowing for habit formation in labor supply. The main findings of our analysis
are that 1) an increase in the importance of working habits strengthens
the effect of monetary policy shocks on relative consumption, weakens on change
in the equilibrium exchange rate, and 2) an
increase in the importance of working habits strengthens the response of
relative consumption and the equilibrium exchange rate change to fiscal policy
shocks.