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Journal article
Temptation-driven preferences: A resolution to New Keynesian anomalies
European economic review [e-journal], v 172, 104932
03 Jan 2025
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Abstract
For empirically plausible calibrations, the New Keynesian model delivers several anomalous results: positive correlation between inflation and nominal rates, higher output volatility with more flexible prices, low government spending multipliers, and unreasonably large responses at the zero-lower-bound, . The introduction of behavioral consumers characterized by Gul-Pesendorfer’s temptation-with-self-control preferences - a well-documented feature of experimental/field evidence on individual choices under risk and over time - resolves the anomalies while retaining the elegance and analytical tractability of the baseline 3-equation framework.
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Details
- Title
- Temptation-driven preferences: A resolution to New Keynesian anomalies
- Creators
- Marco Airaudo (Corresponding Author) - Drexel University, Economics (School of Economics)
- Publication Details
- European economic review [e-journal], v 172, 104932
- Publisher
- Elsevier
- Number of pages
- 23
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:001402173100001
- Scopus ID
- 2-s2.0-85213867728
- Other Identifier
- 991021970698604721
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- Web of Science research areas
- Economics