عادت های عمیق و اثرات پویای شوکهای سیاست های پولی

We introduce deep habits into a sticky-price sticky-wage economy and examine the resulting models ability to account for the impact of monetary policy shocks. The deep habits mechanism gives rise to countercyclical markup movements even when prices are flexible and interacts with nominal rigidities in interesting ways. Key parameters are estimated using a limited information approach. The deep habits model can account very precisely for the persistent impact of monetary policy shocks on aggregate consumption and for both the price puzzle and inflation persistence. A key insight is that the deep habits mechanism and nominal rigidities are complementary: the deep habits model can account for the dynamic effects of monetary policy shock at low to moderate levels of nominal rigidities. The results are shown to be stable over time and not caused by monetary policy changes.

A substantial body of research has studied the dynamic impact of monetary policy shocks using vector autoregression based methods. This literature has demonstrated that monetary policy shocks identified with timing assumptions give rise to persistent effects on output and its components but also that the dynamic effects on prices are associated with two puzzles: the “inflation persistence puzzle” (a slow and delayed rise in inflation in response to an expansionary monetary policy shock) and the “price puzzle” (a temporary drop in the price level after an expansionary monetary policy shock). These two findings are termed puzzles because they appear contrary to conventional monetary wisdom. This paper examines whether a model of countercyclical markups is helpful for understanding these and other features of the impact of monetary policy shocks. We extend a standard sticky-price sticky-wage model with goods-specific (“deep”) habits which gives rise to a theory of time-varying markups even in the absence of nominal rigidities. We demonstrate that this mechanism gives rise to a model that can provide a very precise account of the dynamic effects of monetary policy shocks and which can address both of price puzzle and the inflation persistence puzzle. According to the standard “New Keynesian Phillips curve” inflation is determined by current marginal costs and by expected future inflation. The purely forward looking feature of this relationship implies a lack inflation persistence.1 A large number of papers have addressed this issue by studying mechanisms that either give rise to persistent movements in marginal costs or that introduce backward looking features into the New Keynesian Phillips curve. Galı´ and Gertler (1999) allow for the coexistence of forward looking and backward looking price setters. The presence of backward looking price setters introduces a lagged inflation term in the Phillips curve and therefore helps explaining the sluggish adjustment of inflation to monetary policy shocks. Fuhrer and Moore (1995) study a relative contracting model in which workers care about other workers’ past real wages and they show that this feature may help explain sluggish inflation adjustments to monetary policy shocks.2Erceg et al. (2000) assume that nominal wages as well as prices adjust sluggishly. Christiano et al., 2005, Rabanal and Rubio-Ramirez, 2003 and Smets and Wouters, 2003 have shown that the combination of sticky prices and sticky wages is helpful for accounting for inflation persistence. There has been less theoretical work on the price puzzle an exception being Castelnuovo and Surico (2006) who study a model in which passive policy gives rise to indeterminacy. When the equilibrium is indeterminate, inflation expectations become very persistent and this has the consequence that a structural VAR can erroneously lead one to conclude that expansionary monetary policy shocks give rise to a drop in the price level. We focus instead upon goods market features. We study a monetary model in which it is costly for producers to change prices and for labor unions to change nominal wages. We introduce into this environment the deep habit mechanism proposed in Ravn et al. (2006). The deep habits model assumes that households are subject to keeping up with the Joneses effects at the level of individual goods varieties. This feature implies that the demand function facing individual producers depends not only on relative prices and on the level of aggregate demand but also on the firm’s past sales. The impact of past sales on current demand, often referred to as state dependence, captures empirically relevant aspects of goods demand functions. Houthakker and Taylor (1970) studied goods level demand functions and found that past sales are key for determining current consumption of goods. Guadagni and Little’s (1983) seminal scanner data study of ground coffee purchases documented a large predictive power of past brand choices on current brand choices, a finding reproduced by many researchers when studying brand demand functions, see Chintagunta et al., 2001 for a recent discussion and survey. Browning and Collado (2007) study goods level consumption demand functions controlling for unobserved consumer heterogeneity and for goods-level habits at the household level and find significant habit effects for a substantial number of goods. According to the deep habits model, markups are time-varying even when prices are flexible. The non-constancy of the optimal markup derives from an elasticity effect and an intertemporal effect. The elasticity effect is induced by variations in aggregate demand that affect the price elasticity of demand facing producers. In our model, an increase in current aggregate demand increases the price elasticity and therefore leads producers to lower markups. The intertemporal effect arises because a producer who expects high future demand will have an incentive to lower the current markup in order to attract more future demand. Ravn et al., 2006 and Ravn et al., 2007 have shown that these mechanisms are helpful for understanding the impact of technology shocks and of government spending shocks. In the current paper we argue that deep habits is also an interesting mechanism when accounting for the impact of monetary policy shocks and that it interacts in an intriguing manner with nominal rigidities to produce a model that leads to substantial price inertia even when nominal rigidities are moderate. We first estimate a VAR on post-war US data and derive the impact of a timing-based identified monetary policy shock. We study a small scale VAR that consists of aggregate consumption, the CPI inflation rate, the federal funds rate, and the commodity price index. We include the commodity price index in the VAR in order not to bias our results towards the existence of a price puzzle.3 The VAR measurements of the dynamic effects of a monetary policy shock conform with the conventional wisdom regarding inflation persistence and the price puzzle: the price level drops for two quarters after an expansionary monetary policy shock and the maximum increase in inflation appears as late as 3 years after the initial expansion of monetary policy. We also find that aggregate consumption increases persistently in a hump-shaped manner in response to an expansionary monetary policy shock. We estimate key parameters of the model using a limited information approach and compare the deep habits model with the predictions of a standard New Keynesian model and a New Keynesian model that allows for habits in aggregate consumption. This latter economy differs from the deep habits model in that aggregate habits do not lead to time-variation in markups when prices are flexible. We find that the model with deep habits provides a superior fit to the identified dynamic effects of monetary policy shocks. In particular, this model can account simultaneously for the persistent impact of monetary policy shocks on consumption, for the price puzzle, and for inflation persistence. Moreover, the estimates of the extent of nominal rigidities are significantly lower in the deep habits economy than in the economy with aggregate habits. We show that the model implies a complementarity between nominal rigidities and deep habits. In response to an expansionary monetary policy shock, the presence of nominal rigidities implies that aggregate consumption increases. In the deep habits economy the increase in consumption gives producers an incentive to lower the markup. This by itself gives rise to a smaller inflation impact of an expansionary monetary policy shock in the deep habits economy than in models that assume either no habits or habits that operate at the level of aggregate consumption. When the deep habit effect is sufficiently strong, the deep habits model generates a fall in inflation on impact after an expansionary monetary policy shock. As the consumption boom dies out, producers slowly increase prices and this implies that the model also can account for inflation persistence. Parts of the literature has pursued the idea that the inflation persistence puzzle is not “structural” but caused by changes over time in monetary policy and by instability of the inflation process. It has been pointed out that inflation persistence appears to be sensitive to the monetary policy regime (see e.g. Benati, 2008), and that there appears to have been breaks in the inflation process which renders inflation less persistent when controlled for (see e.g. Levin and Piger, 2003). We repeat our analysis for two sub-samples breaking the data in the third quarter of 1979 when Volcker became the chairman of the Fed. We find that the early sub-sample is associated with more pronounced price and inflation puzzles than the late sample. We reestimate the structural parameters and find that monetary policy has become less accommodating over time, that price rigidity has increased while wage rigidity has declined, but the extent and importance of deep habits have remained roughly constant. The remainder of the paper is structured as follows. Section 2 describes the model. Section 3 contains the details of the structural estimation approach and also applies a structural VAR estimator to US quarterly data. Section 4 analyses the results. Finally, Section 5 concludes.

In this paper we have asked whether a parsimonious sticky-price sticky wage model extended with deep habits can account for the dynamic effects of monetary policy shocks. We find that this is indeed the case. In particular, when allowing for customer market effects modeled through deep habits, one can simultaneously account for the persistent effects of monetary policy shocks on aggregate consumption and for the impact on inflation. One important aspect of our results is that the introduction of deep habits allows one to account for the price puzzle and for inflation persistence without relying on unreasonable extents of nominal rigidities. The reason for this is that nominal rigidities in the form of impediments to price and wage adjustments and deep habits are complementary. The existence of nominal rigidities introduces a role for deep habits in accounting for the impact of monetary policy shocks and the countercyclical nature of markups that derive from deep habits decreases the need for nominal rigidities when accounting for the sluggish adjustment of inflation to monetary policy shocks. We have also shown that while inflation persistence and the price puzzle were more pronounced pre-Volcker, the importance of the deep habit mechanism has remained constant over time. In that sense, our paper points towards structural reasons for the impact of monetary policy shocks on inflation. Our results indicate that more attention should be directed towards goods market features when examining the impact of monetary policy shocks. The previous literature has examined in great detail how marginal cost persistence, backward looking price setting, and labor market frictions impact on monetary policy, but much less attention has been paid to goods market features which we here have shown to be key. We think that this may also have important implications for issues relating to optimal monetary policy design but we leave this issue for future research.