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Rule‐of‐Thumb Consumers, Productivity, and Hours

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  • Francesco Furlanetto
  • Martin Seneca

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.

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  • Francesco Furlanetto & Martin Seneca, 2012. "Rule‐of‐Thumb Consumers, Productivity, and Hours," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 658-679, June.
    • Handle: RePEc:bla:scandj:v:114:y:2012:i:2:p:658-679
    DOI: j.1467-9442.2012.01699.x
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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