Final MNW edits; change date; bib fix

Highlighted/Excess-Sensitivity.tex

@@ -11,7 +11,7 @@ \subsubsection{Relation to the Literature}
 % JS05052019: Propose to drop this footnote
 %\footnote{A prominent exception to this is \cite{opLiquidH2M}, who use daily data and find excess sensitivity to regular payday receipts, a clear micro phenomenon. While this finding is important, our paper is focused on longer (quarterly) frequencies.}
 
-The plausibility of the inattention explanation of the `excess sensitivity' results is bolstered by the fact that the natural experiments that this literature relies upon tend to be rare (stimulus checks designed to ward off recessions come once every ten years or so), or quirky (payments from the Alaska Permanent Fund (\cite{hsiehAlaska}, \cite{kuengAlaska}).  Furthermore, while many of the individual studies are statistically convincing with respect to their particular experiment, the conclusions across studies are sometimes difficult to reconcile (see \cite{hsiehAlaska} or \cite{CoulibalyLiMortgage} for counterexamples to the general tendency of the literature's findings); \cite{kuengAlaska}, for example, finds a higher MPC for high-income than for low-income consumers, in contrast with much of the rest of the literature).
+Furthermore, while many of the individual studies are statistically convincing with respect to their particular experiment, the conclusions across studies are sometimes difficult to reconcile (see \cite{hsiehAlaska} or \cite{CoulibalyLiMortgage} for counterexamples to the general tendency of the literature's findings); \cite{kuengAlaska}, for example, finds a higher MPC for high-income than for low-income consumers, in contrast with much of the rest of the literature).
 
 
 \hypertarget{Excess-Sensitivity-Experiment}{}

cAndCwithStickyE-App.tex

@@ -76,7 +76,7 @@
 
 
 
-	\date{May 20, 2019}
+	\date{May 22, 2019}
 	\maketitle
 
 	\hypertarget{Abstract}{}

cAndCwithStickyE.aux

@@ -207,8 +207,6 @@
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cAndCwithStickyE.bib

@@ -880,13 +880,6 @@ @article{hsiehAlaska
   year =          {2003},
 }
 
-@article{kuengAlaska,
-  author =        {Kueng, Lorenz},
-  journal =       {The Quarterly Journal of Economics},
-  title =         {Excess Sensitivity of High-Income Consumers},
-  year =          {2018},
-}
-
 @article{CoulibalyLiMortgage,
   author =        {Coulibaly, Brahima and Li, Geng},
   journal =       {The Review of Economics and Statistics},
@@ -905,6 +898,17 @@ @article{CoulibalyLiMortgage
                    00000088/00000001/art00002},
 }
 
+@article{kuengAlaska,
+  author =        {Kueng, Lorenz},
+  journal =       {The Quarterly Journal of Economics},
+  number =        {4},
+  pages =         {1693--1751},
+  publisher =     {Oxford University Press},
+  title =         {Excess sensitivity of high-income consumers},
+  volume =        {133},
+  year =          {2018},
+}
+
 @article{brodaParker,
   author =        {Broda, Christian and Parker, Jonathan A.},
   journal =       {Journal of Monetary Economics},

cAndCwithStickyE.tex

@@ -88,7 +88,7 @@
 \jelclass{D83, D84, E21, E32}
 
 
-\date{May 20, 2019  \\ \medskip\medskip \large{Forthcoming, \textit{American Economic Journal: Macroeconomics}}}
+\date{May 22, 2019  \\ \medskip\medskip \large{Forthcoming, \textit{American Economic Journal: Macroeconomics}}}
 \maketitle
 
 \hypertarget{Abstract}{} \opt{JournalFormatting}{\doublespacing}
@@ -567,9 +567,9 @@ \subsection{Frictionless vs Sticky Expectations}\label{sec:StickySOE}
 
 Because households in our model never misperceive the \textit{level} of their own market resources ($\perc{\mLevBF}_{t,i}=\mLevBF_{t,i}$), they can never choose consumption that would violate the budget constraint.  Households observe both their level of income $\yLevBF_{t,i}$ and its idiosyncratic components $\theta_{t,i}$ and ${p}_{t,i}$. If they wanted to do so, households could therefore calculate the aggregate component $\Theta_{t}\times {P}_{t}$, which would correspond with the reports of a statistical agency; but they do \textit{not} observe $\Theta_{t}$ and ${P}_{t}$ separately (because, in our model as in reality, statistical agencies do not report these objects).
 
-Our assumption is simply that households with sticky expectations neither perceive nor attempt to extract an estimate of the decomposition of the observed aggregate state into transitory and permanent components.  Consumers' misperceptions of aggregate permanent income \textit{do} cause them to make systematic errors---but, below, we present calculations showing that for the value of $\Pi$ that we estimate, those errors have small utility costs.
+Our assumption is simply that households with sticky expectations neither perceive nor attempt to extract an estimate of the decomposition of the observed aggregate state into transitory and permanent components.  Consumers' misperceptions of aggregate permanent income \textit{do} cause them to make systematic errors---but, below, we present calculations showing that for the value of $\Pi$ that we calibrate, those errors have small utility costs.
 
-The utility costs would be still smaller if consumers were to perform a certainty-equivalent signal extraction and behaved as though the signal-extracted estimate of the aggregate state is ``truth'' (that is, they ignore the fact that their estimate has an error term), but section~\ref{sec:Comparisons} analyzes the alternative model in which households perform such a signal extraction and shows that the dynamics of aggregate consumption under this assumption do not match the dynamics that are observed in the aggregate data.
+The utility costs would be smaller still if consumers were to perform a certainty-equivalent signal extraction and behaved as though the signal-extracted estimate of the aggregate state is the `truth' (that is, they ignore the fact that their estimate has an error term), but section~\ref{sec:Comparisons} analyzes the alternative model in which households perform such a signal extraction and shows that the dynamics of aggregate consumption under this assumption do not match the dynamics that are observed in the aggregate data.
 
 \hypertarget{AltBeliefs}{}
 \subsubsection{Alternative Beliefs About the Aggregate Income Process}
@@ -581,7 +581,7 @@ \subsubsection{Alternative Beliefs About the Aggregate Income Process}
 
 \subsection{Calibration}\label{sec:calibration}
 
-The full set of parameters is presented in Table~\ref{table:calibration}.  We offer complete discussion of our calibration in online Appendix~\ref{app:Calibration}, but a few aspects warrant comment here.
+The full set of parameters is presented in Table~\ref{table:calibration}.  We offer a complete discussion of our calibration in online Appendix~\ref{app:Calibration}, but a few aspects warrant comment here.
 
 In the SOE model, we set a much lower value of $\beta$ ($ \input \ParmDir/betaSOE.txt $) than would be expected given our calibrated return factor (${\Rprod} = 1.015$), resulting in agents with wealth holdings around the median observed in the data.  This reflects the recent literature finding that for purposes of capturing aggregate consumption dynamics it may be more important to match the behavior of the typical consumer rather than the behavior of the typical holder of a dollar of wealth (see, for example, \cite{opLiquidH2M}).  Readers who prefer a calibration matching \textit{mean} observed wealth can consult the online appendix for a closed economy general equilibrium model, in which we show that the main results still hold.
 
@@ -724,7 +724,7 @@ \subsubsection{Relation to the Literature}
 
 When we assumed that consumers generally know the idiosyncratic components of their income, we were thinking of the kinds of shocks that are normal everyday occurrences and about which information flows automatically to consumers through regular channels like receipt of their paycheck or taking a new job.  Rare events that are outside of ordinary experience, like a once-every-ten-years stimulus check, seem more like our macro than micro shocks.  The channels by which consumers might be imagined to learn about these things in advance---news stories, in particular---are the same kinds of sources through which consumers presumably learn about macroeconomic news to which we have assumed they are inattentive. %
 
-The plausibility of the inattention explanation of the `excess sensitivity' results is bolstered by the fact that the natural experiments that this literature relies upon tend to be rare (stimulus checks designed to ward off recessions come once every ten years or so), or quirky (payments from the Alaska Permanent Fund (\cite{hsiehAlaska}, \cite{kuengAlaska}).  Furthermore, while many of the individual studies are statistically convincing with respect to their particular experiment, the conclusions across studies are sometimes difficult to reconcile (see \cite{hsiehAlaska} or \cite{CoulibalyLiMortgage} for counterexamples to the general tendency of the literature's findings); \cite{kuengAlaska}, for example, finds a higher MPC for high-income than for low-income consumers, in contrast with much of the rest of the literature).
+Furthermore, while many of the individual studies are statistically convincing with respect to their particular experiment, the conclusions across studies are sometimes difficult to reconcile (see \cite{hsiehAlaska} or \cite{CoulibalyLiMortgage} for counterexamples to the general tendency of the literature's findings); \cite{kuengAlaska}, for example, finds a higher MPC for high-income than for low-income consumers, in contrast with much of the rest of the literature).
 
 
 \hypertarget{Excess-Sensitivity-Experiment}{}