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

Adrien Auclert (), Bence Bardóczy and Matthew Rognlie

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

Abstract: We establish an impossibility result for New Keynesian models with a frictionless labor market: these models cannot simultaneously match plausible estimates of marginal propensities to consume (MPCs), marginal propensities to earn (MPEs), and fiscal multipliers. Sticky wages provide a solution to this trilemma.

Keywords: Fiscal multipliers; HANK; MPC; MPE (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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