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Rule-of-thumb consumers, productivity and hours

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  • Francesco Furlanetto

    ()
    (Norges Bank (Central Bank of Norway))

  • Martin Seneca

    (University of Aarhus and Danmarks Nationalbank)

Abstract

In this paper we study the transmission mechanisms 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 in 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 responses of output and consumption after a productivity shock.

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File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2007/WP-20075/
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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2007/05.

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Length: 41 pages
Date of creation: 14 Nov 2007
Date of revision:
Handle: RePEc:bno:worpap:2007_05

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Keywords: rule-of-thumb consumers; productivity shocks; nominal rigidities; real rigidities.;

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  1. Florin Bilbiie, 2005. "Limited Asset Markets Participation, Monetary Policy and (Inverted) Keynesian Logic," Economics Papers 2005-W09, Economics Group, Nuffield College, University of Oxford.
  2. Susanto Basu & John Fernald & Miles Kimball, 1998. "Are technology improvements contractionary?," International Finance Discussion Papers 625, Board of Governors of the Federal Reserve System (U.S.).
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  5. Francesco Furlanetto & Martin Seneca, 2008. "Fiscal shocks and real rigidities," Working Paper 2008/10, Norges Bank.
  6. N. Gregory Mankiw, 1999. "The Savers-Spenders Theory of Fiscal Policy," Harvard Institute of Economic Research Working Papers 1888, Harvard - Institute of Economic Research.
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  15. repec:ebl:ecbull:v:5:y:2004:i:3:p:1-8 is not listed on IDEAS
  16. Francesco FURLANETTO, 2007. "Fiscal Shocks and the Consumption Response when Wages are Sticky," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 07.11, Université de Lausanne, Faculté des HEC, DEEP.
  17. Gisle James Natvik, 2009. "Government Spending and the Taylor Principle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 57-77, 02.
  18. Torben Andersen, 2005. "Is there a Role for an Active Fiscal Stabilization Policy?," CESifo Working Paper Series 1447, CESifo Group Munich.
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  23. Mikael Carlsson, 2003. "Measures of Technology and the Short-run Response to Technology Shocks," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 555-579, December.
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Citations

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Cited by:
  1. Costa Junior, Celso Jose & Sampaio, Armando Vaz & Gonçalves, Flávio de Oliveria, 2012. "Income Transfer as Model of Economic Growth," MPRA Paper 45494, University Library of Munich, Germany.
  2. Furlanetto, Francesco & Natvik, Gisle J. & Seneca, Martin, 2013. "Investment shocks and macroeconomic co-movement," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 208-216.
  3. Costa Junior, Celso José & Sampaio, Armando Vaz, 2014. "Tax Reduction Policies of the Productive Sector and Its Impacts on Brazilian Economy," Dynare Working Papers 36, CEPREMAP.
  4. Richard McManus, 2013. ""We're all in this together"? A DSGE interpretation," Discussion Papers 13/08, Department of Economics, University of York.
  5. Richard McManus, 2013. "Austerity versus Stimulus: A DSGE Political Economy Explanation," Discussion Papers 13/09, Department of Economics, University of York.
  6. Francesco FURLANETTO, 2007. "Fiscal Shocks and the Consumption Response when Wages are Sticky," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 07.11, Université de Lausanne, Faculté des HEC, DEEP.

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