cAndCwithStickyE-App-abstract.metadata

			To match empirical evidence about aggregate consumption dynamics, representative agent macroeconomic models require some mechanism to generate `excess smoothness' in consumption growth.   But a large literature has found no evidence of corresponding smoothness in microeconomic data; consequently, existing microfounded models constructed to match the microdata fail to match the macro smoothness facts.  We show that the micro and macro evidence can be reconciled by a microfounded model in which consumers have accurate knowledge of their personal circumstances but `sticky expectations' about the macroeconomy, and the persistence of aggregate consumption growth reflects consumers' imperfect attention to aggregate shocks. Our proposed degree of (macro) inattention has negligible utility costs because aggregate shocks constitute only a tiny proportion of the uncertainty that consumers face.% R2 - contribution