Rule‐of‐Thumb Consumers, Productivity, and Hours*
Open Access
- 3 April 2012
- journal article
- research article
- Published by Wiley in The Scandinavian Journal of Economics
- Vol. 114 (2) , 658-679
- https://doi.org/10.1111/j.1467-9442.2012.01699.x
Abstract
In this paper, we study the transmission mechanism of productivity shocks in a model with rule‐of‐thumb consumers. In the literature, this financial friction has been studied only with reference to fiscal shocks. We show that the presence of rule‐of‐thumb consumers is also very helpful when accounting for recent empirical evidence on productivity shocks. Rule‐of‐thumb agents, together with nominal and real rigidities, play an important role in reproducing the negative response of hours and the delayed response of output after a productivity shock.Keywords
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