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

Adrien Auclert (), Bence Bardóczy and Matthew Rognlie ()

No 27486, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D52 E52 E62 H31 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ore
Note: EFG ME
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