Read full paper at: http://www.scirp.org/journal/PaperInformation.aspx?PaperID=54076#.VO1rRizQrzE Author(s) Yunqing Wang 1 , Qianwen Liu 1 , Bayi Guan 2 , Xinyu Sui 2 Affiliation(s) 1 Financial Research Center, Fudan University, Shanghai, China . 2 Commercial College, Yantai Nanshan University, Yantai, China . ABSTRACT This paper develops a new open economy macroeconomics model by allowing for habit formation in labor supply. The main findings of our analysis are that 1) an increase in the importance of working habits strengthens the effect of monetary policy shocks on relative consumption, weakens on change in the equilibrium exchange rate, and 2) an increase in the importance of working habits strengthens the response of relative consumption and the equilibrium exchange rate change to fiscal policy shocks. KEYWORDS Working Habits , New Open Economy Macroeconomics , Monetary and Fiscal Policy Cite this pa...
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