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A Simple Mapping from MPCs to MPXs

Author

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  • David Laibson
  • Peter Maxted
  • Benjamin Moll

Abstract

Standard consumption models assume a notional consumption flow that does not distinguish between nondurable and durable consumption. Such notional-consumption models generate notional marginal propensities to consume (MPC). By contrast, empirical work and policy discussions often highlight marginal propensities for expenditure (MPX), which incorporate spending on a durable stock. We compare the notional-consumption model to an isomorphic model with a durable stock, and map notional MPCs into MPXs. The mapping is especially simple for a one-period horizon: MPX = (1 - s + s/(r+d)) x MPC, with durable share s, real interest rate r, and durable depreciation rate d.

Suggested Citation

  • David Laibson & Peter Maxted & Benjamin Moll, 2022. "A Simple Mapping from MPCs to MPXs," NBER Working Papers 29664, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29664
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    Cited by:

    1. Winfried Koeniger & Peter Kress, 2024. "The Effect of Unconventional Fiscal Policy on Consumption -New Evidence based on Transactional Data," Swiss Finance Institute Research Paper Series 24-58, Swiss Finance Institute.
    2. Sean Chanwook Lee & Omeed Maghzian, 2023. "Household Liquidity and Macroeconomic Stabilization: Evidence from Mortgage Forbearance," Working Papers 23-12, Federal Reserve Bank of Boston.
    3. Yunho Cho & James Morley & Aarti Singh, 2024. "Did marginal propensities to consume change with the housing boom and bust?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(1), pages 174-199, January.
    4. Kirill Borusyak & Xavier Jaravel & Jann Spiess, 2021. "Revisiting Event Study Designs: Robust and Efficient Estimation," Papers 2108.12419, arXiv.org, revised Jan 2024.

    More about this item

    JEL classification:

    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G50 - Financial Economics - - Household Finance - - - General
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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