MPCs, MPEs and Multipliers: A Trilemma for New Keynesian Models

Adrien Auclert and Matthew Rognlie

No 14977, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that New Keynesian models with frictionless labor supply face a challenge: given standard parameters, they cannot simultaneously match plausible estimates of marginal propensities to consume (MPCs), marginal propensities to earn (MPEs), and fiscal multipliers. A HANK model with sticky wages provides a solution to this trilemma.

Keywords: Mpc; Mpe; Fiscal multipliers; Hank (search for similar items in EconPapers)
JEL-codes: D52 E52 E62 H31 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ore
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: MPCs, MPEs, and Multipliers: A Trilemma for New Keynesian Models (2023)
Working Paper: MPCs, MPEs and Multipliers: A Trilemma for New Keynesian Models (2020)
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