Sunspot-driven fat tails: A note

Empirical growth-rate distributions of major macroeconomic aggregates are typically non-Normal and exhibit fat tails. We advance the idea that indeterminacies in standard rational expectations models can qualify as a source of high-frequency extreme macroeconomic outcomes. In a univariate setup, we demonstrate the emergence of fat-tailed behavior for an endogenous variable even though structural and sunspot shocks both follow Normal distributions