The Macroeconomic Effects of Excess Savings

Bence Bardóczy, Jae Sim and Andreas Tischbirek
Additional contact information
Bence Bardóczy: https://www.federalreserve.gov/econres/bence-a-bardoczy.htm

No 2024-062, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We study the consequences of shocks to the household wealth distribution in dynamic general equilibrium by characterizing the rate at which excess wealth is depleted. Analytical results link the aggregate decumulation rate to the distribution of the additional balances, micro intertemporal marginal propensities to consume, and general equilibrium feedback. A quantitative heterogeneous agent New Keynesian model matches the depletion path of the excess savings built up during the COVID-19 pandemic across the income distribution. The model predicts a substantial but steadily waning boost to consumption and explains up to 40 percent of the surge in inflation observed in 2020 and 2021.

Keywords: Excess savings; Heterogeneous agent New Keynesian (HANK) models; Incomplete markets; Household portfolios; Inflation dynamics; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: E21 E31 E32 E52 (search for similar items in EconPapers)
Pages: 50 p.
Date: 2024-08-09
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2024062pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2024-62

DOI: 10.17016/FEDS.2024.062

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().