TY - JOUR
T1 - The marginal propensity to consume over the business cycle
AU - Gross, Tal
AU - Notowidigdo, Matthew J.
AU - Wang, Jialan
N1 - Publisher Copyright:
© 2020, American Economic Association.
PY - 2020/4/1
Y1 - 2020/4/1
N2 - We estimate how the marginal propensity to consume (MPC) out of liquidity varies over the business cycle. Ten years after a Chapter 7 bankruptcy, the bankruptcy flag is removed from the filer's credit report, generating an increase in credit score. In the year following flag removal, credit card limits increase by $778 and credit card balances increase by $290, implying an MPC of 0.37. Using cohorts of flag removals, we find that the MPC was 20 to 30 percent higher during the Great Recession, increased during the 2001 recession, and is positively correlated with the local unemployment rate.
AB - We estimate how the marginal propensity to consume (MPC) out of liquidity varies over the business cycle. Ten years after a Chapter 7 bankruptcy, the bankruptcy flag is removed from the filer's credit report, generating an increase in credit score. In the year following flag removal, credit card limits increase by $778 and credit card balances increase by $290, implying an MPC of 0.37. Using cohorts of flag removals, we find that the MPC was 20 to 30 percent higher during the Great Recession, increased during the 2001 recession, and is positively correlated with the local unemployment rate.
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U2 - 10.1257/mac.20160287
DO - 10.1257/mac.20160287
M3 - Article
AN - SCOPUS:85089270184
SN - 1945-7707
VL - 12
SP - 351
EP - 384
JO - American Economic Journal: Macroeconomics
JF - American Economic Journal: Macroeconomics
IS - 2
ER -