CEF.UP – ECO Seminar

Tuesday – May 27^th 2025, at 13:00h | Room 305

The Marginal Propensity to Consume in Behavioral Macroeconomics

Valerio Pieroni – University of Essex (England, United Kingdom)

Abstract:

“We develop a behavioral Heterogeneous Agent New Keynesian (HANK) model with mental accounting to quantify the macroeconomic implications of heterogeneous consumption responses to income changes. In the model, household earnings provide a reference point to finance expenditure decisions. This yields an empirically realistic distribution of wealth and Marginal Propensity to Consume (MPC). We use the model to quantify the importance of MPC heterogeneity for the response of aggregate demand to monetary policy and fiscal stimulus.”