Rule‐of‐Thumb Consumers, Productivity, and Hours

Francesco Furlanetto and Martin Seneca

Scandinavian Journal of Economics, 2012, vol. 114, issue 2, 658-679

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.

Date: 2012
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https://doi.org/10.1111/j.1467-9442.2012.01699.x

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Working Paper: Rule-of-thumb consumers, productivity and hours (2007)
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