Deep Habits in the New Keynesian Phillips Curve

@article{Lubik2011DeepHI,
  title={Deep Habits in the New Keynesian Phillips Curve},
  author={Thomas A. Lubik and Wing Leong Teo},
  journal={ERN: Other Macroeconomics: Employment},
  year={2011}
}
We derive and estimate a New Keynesian Phillips curve (NKPC) in a model where consumers are assumed to have deep habits. Habits are deep in the sense that they apply to individual consumption goods instead of aggregate consumption. This alters the NKPC in a fundamental manner as it introduces expected and contemporaneous consumption growth as well as the expected marginal value of future demand as additional driving forces for inflation dynamics. We construct the driving process in the deep… 
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Inventories, In ‡ation Dynamics, and the New Keynesian Phillips Curve " . Forthcoming
  • Inventories, In ‡ation Dynamics, and the New Keynesian Phillips Curve " . Forthcoming
  • 2011
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