This paper shows how uninsurable unemployment risk is crucial to qualitatively and quantitatively match macro responses … behaviors, triggering a fall in aggregate demand and supply. These precautionary behaviors increase the unemployment risk of the … imperfectly insured households, who strengthen precautionary saving. When the feedback loop between unemployment risk and …

two channels in driving aggre- gate consumption fluctuations in the US: (i) precautionary savings against un- employment … risk and (ii) MPC heterogeneity. I find that MPC heterogeneity is the dominant channel because a large fraction of …

incorporate the effects of macroeconomic uncertainty on private savings behavior. It is shown that the greater the uncertainty in … savings and, other things equal, the larger is the current account surplus. Empirical support for the model is found using …