The New Open Economy Macroeconomics of Working Habits

Yunqing Wang¹, Qianwen Liu¹, Bayi Guan², Xinyu Sui²

¹Financial Research Center, Fudan University, Shanghai, China.
²Commercial College, Yantai Nanshan University, Yantai, China.

DOI: 10.4236/tel.[phone]                

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.

Keywords

Working Habits, New Open Economy Macroeconomics, Monetary and Fiscal Policy

Conflicts of Interest

The authors declare no conflicts of interest.

References

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