Pain of Paying in a Business Cycle Model
29 Pages Posted: 2 Feb 2018 Last revised: 17 Dec 2021
Date Written: December 9, 2021
This paper builds a business cycle model in which consumers experience a pain of paying and neglect the opportunity costs. The demand block is a linear function decreasing in the price and in the interest rate. The supply block is a Phillips curve. The model is simple, yields textbook predictions, and solves the New Keynesian puzzles.
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