Deep Habits Research Articles

Deep Habits and the Macroeconomic Effects of Government Debt

In this paper, we study the effects of government debt on macroeconomic aggregates in a non-Ricardian framework. We develop a micro-founded framework which combines time-varying markups, endogenous labor supply and overlapping generations based on infinitely-lived families. The main contribution of this paper is to provide a new transmission mechanism of public debt through the countercyclical markup movements induced by external deep habits. We analyze the effects of debt-financed tax cuts. We show that the interest rate rises, entailing higher markups, which imply a fall in employment and consumption. It is particularily noteworthy that, even without capital, a crowding out effect of government debt is obtained in the long run. However, the short-run expansionary effect of debt-financed tax cuts, which would eventually be expected in a non-Ricardian framework, fails to occur. This is due to our flexible-price framework. On the other hand, we show that incorporating sticky prices in our model causes debt-financed tax cuts to have a short-run expansionary effect while preserving the long-run contractionary effect.

Deep habits and the dynamic effects of monetary policy shocks

We introduce deep habits into a sticky-price sticky-wage economy and examine the resulting models ability to account for the impact of monetary policy shocks. The deep habits mechanism gives rise to countercyclical markup movements even when prices are flexible and interacts with nominal rigidities in interesting ways. Key parameters are estimated using a limited information approach. The deep habits model can account very precisely for the persistent impact of monetary policy shocks on aggregate consumption and for both the price puzzle and inflation persistence. A key insight is that the deep habits mechanism and nominal rigidities are complementary: the deep habits model can account for the dynamic effects of monetary policy shock at low to moderate levels of nominal rigidities. The results are shown to be stable over time and not caused by monetary policy changes.

Asset Prices and Real Exchange Rates with Deep Habits

I introduce an external habit for each consumption good, known as deep habits, into an otherwise standard international equilibrium model with multiple consumption goods and multiple countries. I show that deep habits coupled with consumption home bias account for a wide range of asset pricing and exchange rate moments. Calibrated to a set of ten countries, the model reproduces the cross-sectional evidence on currency risk premiums when sorting on interest rates, interest rate volatility, innovations to global exchange rate volatility, and value. Hence, the model provides an equilibrium interpretation of these empirical regularities.

Incomplete cost pass-through under deep habits

A number of empirical studies document that marginal cost shocks are not fully passed through to prices at the firm level and that prices are substantially less volatile than costs. We show that in the relative-deep-habits model of Ravn, Schmitt-Grohé, and Uribe [Ravn, M., Schmitt-Grohé, S., Uribe, M., 2006. Deep habits. Review of Economic Studies 73, 195–218], firm-specific marginal cost shocks are not fully passed through to product prices. That is, in response to a firm-specific increase in marginal costs, prices rise, but by less than marginal costs leading to a decline in the firm-specific markup of prices over marginal costs. Pass-through is predicted to be even lower when shocks to marginal costs are anticipated by firms. In our model unanticipated firm-specific cost shocks lead to incomplete pass-through (or a decline in markups) of about 20 percent and anticipated cost shocks are associated with incomplete pass-through of about 50 percent. The model predicts that cost pass-through is increasing in the persistence of marginal cost shocks and U-shaped in the strength of habits. The relative-deep-habits model implies that conditional on marginal cost disturbances, prices are less volatile than marginal costs.

Foreign Exchange Rate Risk in a Small Open Economy

Resolving the forward premium puzzle requires a volatile foreign exchange rate risk premium that covaries negatively with the expected depreciation rate. Earlier work has shown how models featuring consumption habits can generate such premia when either trade costs or 'deep habits' are assumed. We show that as long as consumption habits are slow-moving and shocks are highly persistent, a standard small open endowment economy - without any additional features - can address the puzzle. Moreover endogenising the labour supply decision in the small open economy can improve the model's ability to match risk premia observations so long as it makes business cycles less synchronised.

O gênero Pholadomya Sowerby, 1823 (Mollusca: Bivalvia) na formação Jandaíra (Cretáceo Superior), Bacia Potiguar: implicações paleoecológicas e paleogeográficas

Pholadomya Sowerby, 1823 is an anomalodesmatan bivalve that dispersed during Mesozoic, like other Mollusks, colonizating the South Atlantic shallow seas, between Brazil and Africa. On brazilian Cretaceous the sources of Pholadomya are scarce, occurring in outcrops from Algodões Formation, Gramame Formation and Jandaíra Formation, where occurs the species Pholadomya baixaleitensis. Based on specimens from new outcrops of Jandaíra Formation, a new occurrence of P. cf. adversa and P. baixaleitensis are shown and a new morfotype for the genus is described. It was possible to infer that the species studied presented deep endobentonic habits, and burrowed slowly the sediment, probably living their whole life into the same cavity. During Campanian Pholadomya is known from Cameroon, France, Poland, Austria, Germany and other localities in United States of America, occurring in association with other tethyan mollusks. The records of the genus in the marginal equatorial basins enhance the fossil bivalve diversity, and agree with the hypotesis of a south latitudinal range for the Tethyan Realm during Upper Cretaceous.

Pricing to Habits and the Law of One Price

This paper proposes a novel international transmission mechanism based on the assumption of deep habits. The term deep habits stands for a preference specification according to which consumers form habits on a good-by-good basis. Under deep habits, firms face more elastic demand functions in markets where nonhabitual demand is high relative to habitual demand, creating an incentive to price discriminate. We refer to this type of price discrimination as pricing to habits. In the presence of pricing to habits, innovations to domestic aggregate demand induce a decline in markups in the domestic country but not abroad, leading to a departure from the law of one price. In this way, the proposed pricing-to-habit mechanism can explain the observation that prices of the same good across countries, expressed in the same currency, vary over the business cycle. Furthermore, it can account for the empirical fact that in response to a positive domestic demand shock, such as an increase in government spending, the real exchange rate depreciates, domestic consumption expands, and the trade balance deteriorates.

Technique de Tweed-Merrifield et dimension verticale dans les classes II hyperdivergentes

The cases presented in this paper share a common skeletal characteristic, hyperdivergence, a common therapeutic strategy, similar diagnostic elements, and a common choice of non-symmetrical extractions. Interceptive treatment is especially useful for this type of malocclusion to prevent deep over-bites, atypical habits, and severe malocclusion. In the Tweed-Merrifeld technique, orthodontists use careful dental, occlusal, cephalometric, and esthetic evaluations to establish an appropriate treatment plan and therapeutic strategy whose goal will be: to eliminate unhealthy compensations, re-position, if necessary, alveolar structures on basal bone, reduce anterior-posterior and vertical discrepancies, favor anterior mandibular rotation, improve facial esthetics, restore functional occlusion, and assure stability of results. Because of its consistent capability of achieving predictable resolution of the most varied and complex orthodontic disorders, the author has chosen this technique for routine use in his daily orthodontic practice.