Do consumers respond symmetrically to positive and negative income shocks?

Dimitris Georgarakos

Research Bulletin, 2018, vol. 44

Abstract: Recent research finds that consumers respond more strongly to negative than to positive transitory income shocks, for example, a temporary income tax increase as opposed to a one-off bonus payment. It also suggests that the response can depend on the size of the change in income. These findings lend empirical support to economic models that incorporate liquidity constraints and precautionary saving. JEL Classification: D12, D14, E21

Keywords: Marginal Propensity to Consume.; Positive and Negative Income Shocks; Transitory Income Shocks (search for similar items in EconPapers)
Date: 2018-03
Note: 483508
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Citations: View citations in EconPapers (1)

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