In situations of what we now describe as radical uncertainty, the core model of agent behaviour, of rational autonomous agents with stable preferences, is not useful. Instead, a different principle, in which the decisions of an agent are based directly on the decisions and strategies of other...

Precautionary pricing and increasing markups in representative-agent DSGE models with nominal rigidities are commonly used to generate negative output effects of uncertainty shocks. We assess whether this theoretical model channel is consistent with the data. Three things stand out. First,...

This paper uses an estimated Heterogeneous Agent New Keynesian (HANK) model to evaluate the quantitative importance of 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...