MPC Heterogeneity and the Dynamic Response of Consumption to Monetary Policy

Miguel Ampudia, Russell Cooper, Julia Le Blanc and Guozhong Zhu

American Economic Journal: Macroeconomics, 2024, vol. 16, issue 3, 343-88

Abstract: This paper studies how household financial choices affect the impact of monetary policy on consumption. Based on micro data from four major euro area countries, we estimate key structural parameters using a simulated method of moments approach to match moments related to asset market participation rates, portfolio shares, and wealth-to-income ratios by education and country. The country-specific distributions of marginal propensities to consume (MPCs) out of income and financial wealth are not degenerate. Due to this MPC heterogeneity, monetary policy, operating through income and asset returns, has a differential impact on individuals within and across countries.

JEL-codes: E21 E52 G51 (search for similar items in EconPapers)
Date: 2024
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Working Paper: MPC heterogeneity and the dynamic response of consumption to monetary policy (2023)
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DOI: 10.1257/mac.20210277

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