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Rule-of-thumb consumers, productivity and hours

Author

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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.

Suggested Citation

  • Francesco Furlanetto & Martin Seneca, 2007. "Rule-of-thumb consumers, productivity and hours," Working Paper 2007/05, Norges Bank.
  • Handle: RePEc:bno:worpap:2007_05
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    References listed on IDEAS

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    More about this item

    Keywords

    rule-of-thumb consumers; productivity shocks; nominal rigidities; real rigidities.;
    All these keywords.

    JEL classification:

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

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    This paper has been announced in the following NEP Reports:

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