A Simple Mapping from MPCs to MPXs / David Laibson, Peter Maxted, Benjamin Moll.

Format:

Book

Author/Creator:

Laibson, David.

Contributor:

National Bureau of Economic Research.

Maxted, Peter.

Moll, Benjamin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29664.

NBER working paper series no. w29664

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

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.

Notes:

Print version record

January 2022.