Title page
Contents
Abstract 2
Non-technical Summary 3
1. Introduction 5
2. Empirical Evidence 9
2.1. Descriptive Statistics of Households from the CEX 10
2.2. Consumption Response to Macro Uncertainty is Heterogeneous 10
2.3. Labor Markets Are Highly Responsive to Macro Uncertainty 12
3. The Model 14
3.1. Households 16
3.2. Firms 21
3.3. Monetary Authority 25
3.4. Exogenous Processes 25
3.5. Market Clearing 26
3.6. Aggregate State and Equilibrium 28
3.7. Precautionary Savings 29
4. Quantitative Results 30
4.1. Calibration and Estimation of Parameters 30
4.2. Solution Method 32
4.3. Main Results 32
4.4. A Model with Hand-to-Mouth and Ricardian Households 36
4.5. Robustness Checks 37
5. Conclusion 38
References 40
Appendices 45
A. Data Description 45
B. Robustness Checks for Empirical Analysis 48
C. Robustness Checks for Theoretical Analysis 59
Table 1. Descriptive Statistics 9
Table 2. Quarterly Calibration 31
Figure 1. Empirical and Model-implied Impulse Responses of Consumption across the Income Distribution to One-Standard Deviation Macro Uncertainty Shocks 12
Figure 2. Empirical and Model-implied Impulse Responses to One-Standard Deviation Macro Uncertainty Shocks 13
Figure 3. Moments of Job Finding Rate and Job Separation Rate by Income Quintile 14
Figure 4. Impulse Responses to One-Standard Deviation Technology Uncertainty Shocks 33
Figure 5. Propagation Mechanism of Positive Uncertainty Shocks 34
Figure 6. Consumption Heterogeneity 35
Figure 7. Consumption Heterogeneity in Response to Technology Uncertainty: Hand-to-Mouth Households 36
Figure 8. Impulse Responses to One-Standard Deviation Technology Uncertainty: Comparison between HANK, TANK, and RANK 38
Table B.1. Descriptive Statistics by Household's Income Quintile 51
Figure B.1. Empirical Impulse Responses of Consumption across Income Quintile to One-Standard Deviation Macro Uncertainty Shocks 52
Figure B.2. Empirical Impulse Responses of Consumption Residuals across Income Distribution to One-Standard Deviation Macro Uncertainty Shocks 53
Figure B.3. Empirical Impulse Responses of Consumption Residuals across Income Quintile to One-Standard Deviation Macro Uncertainty Shocks 54
Figure B.4. Empirical Impulse Responses of Durable Consumption across Income Distribution to One-Standard Deviation Macro Uncertainty Shocks 55
Figure B.5. Robustness Checks for Empirical Impulse Responses of Aggregate Nondurable and Durable Consumption from CEX and NIPA to One-Standard Deviation... 56
Figure B.6. Robustness Checks for Empirical Impulse Responses of Consumption across Income Distribution to One-Standard Deviation Macro Uncertainty Shocks 57
Figure B.7. Robustness Checks for Empirical Impulse Responses to One-Standard Deviation Macro Uncertainty Shocks 58
Figure C.8. Impulse Responses to One-Standard Deviation Interest Rate Uncertainty 65
Figure C.9. Consumption Heterogeneity in Response to Interest Rate Uncertainty 66
Figure C.10. Sensitivity Analyses 1 67
Figure C.11. Sensitivity Analyses 2 68