Implications of habit formation for optimal monetary policy
Bank for International Settlements; Board of Governors of the Federal Reserve System
Standard New Keynesian model augmented with habit formation in consumption, affecting both aggregate demand (IS curve) and aggregate supply (Phillips curve) through marginal utility of consumption
Calvo staggered price setting with fraction 1-alpha adjusting each period; monopolistic competition with elasticity of substitution theta
Table 2 p.321
Simple interest rate rule with h=0.4, base case calibration