A Simple Mapping from MPCs to MPXs

David Laibson, Peter Maxted and Benjamin Moll

No 29664, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Standard consumption models assume a notional consumption flow that does not distinguish between nondurable and durable consumption. Such notional-consumption models generate notional marginal propensities to consume (MPC). By contrast, empirical work and policy discussions often highlight marginal propensities for expenditure (MPX), which incorporate spending on a durable stock. We compare the notional-consumption model to an isomorphic model with a durable stock, and map notional MPCs into MPXs. The mapping is especially simple for a one-period horizon: MPX = (1 - s + s/(r+d)) x MPC, with durable share s, real interest rate r, and durable depreciation rate d.

JEL-codes: C82 D11 D15 E21 E60 E62 G50 H31 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-mac
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