Theoretical Economics Letters

Volume 5, Issue 1 (February 2015)

ISSN Print: 2162-2078   ISSN Online: 2162-2086

Google-based Impact Factor: 0.82  Citations  

The New Open Economy Macroeconomics of Working Habits

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DOI: 10.4236/tel.2015.51017    2,820 Downloads   3,278 Views   Citations

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.

Cite this paper

Wang, Y. , Liu, Q. , Guan, B. and Sui, X. (2015) The New Open Economy Macroeconomics of Working Habits. Theoretical Economics Letters, 5, 125-131. doi: 10.4236/tel.2015.51017.

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