Mental Accounts and Consumption Sensitivity across the Distribution of Liquid Assets

James Graham and Robert A. McDowall

American Economic Journal: Macroeconomics, 2026, vol. 18, issue 1, 1-33

Abstract: We study consumption spending responses to predictable income using household-level data from a US financial institution. Even for households with large liquid asset balances, we find no spending in anticipation of income receipt, substantial spending following receipt, and significant front-loading with respect to date of receipt. To rationalize these findings, we develop a tractable model of mental accounts where consumption choices are partitioned across current income and current assets. Our model reproduces the timing, magnitude, and cross-section of consumption responses observed in the data. Finally, we use the model to study the effectiveness of targeted and untargeted fiscal stimulus policies.

JEL-codes: D12 E21 E62 G21 G51 (search for similar items in EconPapers)
Date: 2026
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Mental Accounts and Consumption Sensitivity Across the Distribution of Liquid Assets (2024)
Working Paper: Mental Accounts and Consumption Sensitivity Across the Distribution of Liquid Assets (2024)
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DOI: 10.1257/mac.20220200

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