The (Ir)Relevance of Rule‐of‐Thumb Consumers for U.S. Business Cycle Fluctuations

Alice Albonico, Guido Ascari and Qazi Haque

Journal of Money, Credit and Banking, 2024, vol. 56, issue 4, 769-804

Abstract: We estimate a medium‐scale model with and without rule‐of‐thumb consumers over the pre‐Volcker and the Great Moderation periods, allowing for indeterminacy. Passive monetary policy and sunspot fluctuations characterize the pre‐Volcker period for both models. In both subsamples, the estimated fraction of rule‐of‐thumb consumers is low, such that the two models are empirically almost equivalent; they yield very similar impulse response functions, variance, and historical decompositions. We conclude that rule‐of‐thumb consumers are irrelevant to explain aggregate U.S. business cycle fluctuations.

Date: 2024
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https://doi.org/10.1111/jmcb.13057

Related works:
Working Paper: The (Ir)Relevance of Rule-of-Thumb Consumers for U.S. Business Cycle Fluctuations (2022)
Working Paper: The (ir)relevance of rule-of-thumb consumers for US business cycle fluctuations (2020)
Working Paper: The (Ir)Relevance of Rule-of-Thumb Consumers for U.S. Business Cycle Fluctuations (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:56:y:2024:i:4:p:769-804

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