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

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