Work

Five Facts about MPCs: Evidence from a Randomized Experiment

Year: 2024

Type: article

Abstract: We present five facts from an experiment on the marginal propensity to consume (MPC) out of transitory transfers: (1) the one-month MPC on a cash-like transfer is 23 percent; (2) it is substantially higher (61 percent) on a transfer administered via a card where remaining funds expire after three weeks, inconsistent with money fungibility; (3) the consumption response is concentrated in the first three weeks; (4) MPCs vary with household characteristics but are high even for the liquid wealthy; (5) unconditional MPC distribution exhibits large variation. Our findings inform the design of stimulus policies and pose challenges to existing macroeconomic models. (JEL D12, D91, E21, G51, I38)

Source: American Economic Review

DOI: 10.1257/aer.20240138

Authors: Johannes Boehm, Etienne Fize, Xavier Jaravel

Institutions: Graduate Institute of International and Development Studies, Paris School of Economics, Center for Economic and Policy Research, Centre for Economic Policy Research

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: UK Research and Innovation, Agence Nationale de la Recherche, Economic and Social Research Council

Awards: G1847908233, Implementing Helicopter Money: A Randomized Policy Evaluation