Does Consumption Respond to Transitory Shocks? Reconciling Natural Experiments and Semistructural Methods

Jeanne Commault

SciencePo Working papers Main from HAL

Abstract: Studies based on natural experiments find that consumption responds strongly and significantly to a transitory variation in income, while semistructural estimations find no pass-through of transitory shocks to consumption. I develop a more robust semistructural estimator that relaxes the assumption that log consumption is a random walk. The robust pass-through estimate is significant and large, implying a yearly marginal propensity to consume of 0.32, close to the natural experiment findings. The robust estimator performs well in numerical simulations of a life cycle model, while nonrobust estimators do not. The difference between the two in the simulations is similar to their difference in the survey data.

Date: 2022-04-01
References: Add references at CitEc
Citations: View citations in EconPapers (17)

Published in American Economic Journal: Macroeconomics, 2022, 14 (2), pp.96-122. ⟨10.1257/mac.20190296⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Does Consumption Respond to Transitory Shocks? Reconciling Natural Experiments and Semistructural Methods (2022)
Working Paper: Does Consumption Respond to Transitory Shocks? Reconciling Natural Experiments and Semistructural Methods (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03947994

DOI: 10.1257/mac.20190296

Access Statistics for this paper

More papers in SciencePo Working papers Main from HAL
Bibliographic data for series maintained by Contact - Sciences Po Departement of Economics ().