This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Review: Vol. 90 No. 3 (June 2000)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

Habit Formation in Consumption and Its Implications for Monetary-Policy Models

Article Citation

Fuhrer, Jeffrey C. 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models." American Economic Review, 90(3): 367-390.

DOI: 10.1257/aer.90.3.367

Abstract

This paper explores a monetary-policy model with habit formation for consumers, in which consumers' utility depends in part on current consumption relative to past consumption. The empirical tests developed in the paper show that one can reject the hypothesis of no habit formation with tremendous confidence, largely because the habit-formation model captures the gradual hump-shaped response of real spending to various shocks. The paper then embeds the habit-consumption specification in a monetary-policy model and finds that the responses of both spending and inflation to monetary-policy actions are significantly improved by this modification.

Article Full-Text Access

Full-text Article

Authors

Fuhrer, Jeffrey C. (Federal Reserve Bank of Boston)

JEL Classifications

E52: Monetary Policy
E21: Macroeconomics: Consumption; Saving; Wealth
E43: Determination of Interest Rates; Term Structure of Interest Rates


American Economic Review


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us