Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5083686 | International Review of Economics & Finance | 2014 | 16 Pages |
Abstract
By incorporating a keeping-up-with-the-Joneses preference into the Redux model, this paper sketches the implications of consumption externalities for the short-run and long-run equilibria. We show that the size of the consumption externality plays a crucial role in terms of affecting the long-run and short-run effects of important economic variables. Keeping-up-with-the-Joneses in relation to domestic benchmark consumption has the effect of magnifying the impact of monetary shocks on the exchange rate. Besides, simple numerical analyses show that the exchange rate volatility is raised (reduced) by an increasing rate as the size of the externality in regard to domestic (foreign) consumption increases.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Ming-Jen Chang, Juin-Jen Chang, Jhy-Yuan Shieh,