unemployment. The novel feature is that the scope for sunspot-driven volatility depends on the level of household wealth. When … wealth is high, consumer demand is largely insensitive to unemployment expectations and the economy is robust to confidence … crises. When wealth is low, a stronger precautionary motive makes demand more sensitive to unemployment expectations, and the …

recessions, the upper end of the shock distribution collapses—large upward earnings movements become less likely—whereas the …