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Rule-of-Thumb Consumers, Productivity, and Hours

  • Francesco Furlanetto
  • Martin Seneca

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://hdl.handle.net/10.1111/j.1467-9442.2012.01699.x
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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 114 (2012)
Issue (Month): 2 (06)
Pages: 658-679

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Handle: RePEc:bla:scandj:v:114:y:2012:i:2:p:658-679
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