experiences a shock forcing it to start learning afresh. Firms differ in their information; more informed firms have lower … posterior variances in beliefs. An uncertainty shock is a rise in the probability that any given firm will lose its information … a prolonged recession followed by anemic recovery in response to an uncertainty shock. When confronted with a rise in …

and transitory changes in their idiosyncratic productivity. Upon the arrival of a productivity shock, a firm's uncertainty … spikes up and then fades with learning until the arrival of the next shock. These uncertainty cycles, when paired with menu …