We document heterogeneity in the marginal propensity to consume (MPC) across household characteristics relevant to understanding heterogeneous agent models and monetary policy transmission. We find a strong negative relationship between household liquid wealth and MPC. We show that household liquid wealth predicts MPC closely for every other household characteristic we look at. We use a new empirical method that overcomes sources of bias found in the existing literature, along with administrative data from Denmark that allow us to identify heterogeneous behavior. We use our results to analyze monetary policy transmission mechanisms in both Denmark and the United States.
Crawley, Edmund, and Andreas Kuchler.
"Consumption Heterogeneity: Micro Drivers and Macro Implications."
American Economic Journal: Macroeconomics,
Consumer Economics: Empirical Analysis
Personal Income, Wealth, and Their Distributions
Macroeconomics: Consumption; Saving; Wealth
Interest Rates: Determination, Term Structure, and Effects
Household Finance: Household Saving, Borrowing, Debt, and Wealth