MPCPerm big.tex Precautionary Saving and the Marginal Propensity To Consume Out of Permanent Income
نویسنده
چکیده
Because the budget constraint implies that consumption must eventually fully adjust to permanent shocks, intuition suggests that consumption-smoothers will have an immediate marginal propensity to consume of one out of permanent shocks. However, this paper shows that if consumers are impatient and experience both transitory and permanent income shocks, the immediate marginal propensity to consume out of permanent shocks is strictly less than one, because buffer-stock savers have a target wealth-to-permanent-income ratio; for a consumer starting at the target ratio, a positive shock to permanent income moves their actual wealthto-permanent-income ratio below the target, temporarily boosting the saving rate.
منابع مشابه
Precautionary Saving and the Marginal Propensity to Consume Out of Permanent Income
The budget constraint requires that, eventually, consumption must adjust fully to any permanent shock to income. Intuition suggests that, knowing this, optimizing agents will fully adjust their spending immediately upon experiencing a permanent shock. However, this paper shows that if consumers are impatient and are subject to transitory as well as permanent shocks, the optimal marginal propens...
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