The Intertemporal Keynesian Cross
By Adrien Auclert, Matthew Rognlie, Ludwig Straub. Journal of Political Economy, 2018
214 citations recorded by the source corpus.
We demonstrate the importance of intertemporal marginal propensities to consume (iMPCs) in disciplining general equilibrium models with heterogeneous agents and nominal rigidities. In a benchmark case, the dynamic response of output to a change in the path of government spending or taxes is given by an equation involving iMPCs, which we call the intertemporal Keynesian cross. Fiscal multipliers depend only on the interaction between iMPCs and public deficits. We provide empirical estimates of iMPCs and argue that they are inconsistent with representative-agent, two-agent and one-asset heterogeneous-agent models, but can be matched by models with two assets. Quantitatively, models that match empirical iMPCs predict deficit-financed fiscal multipliers that are larger than one, even if monetary policy is active, taxation is distortionary, and investment is crowded out. These models also imply larger amplification of shocks that involve private borrowing, as we illustrate in an application to deleveraging.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/197213fbc3140eaca9636a6e5ca2cf832cd2510e
Citations in the corpus
- Stock Market Wealth and the Real Economy: A Local Labor Market Approach (2019, unknown): “Our preferred specification controls for county fixed effects, stateby-quarter fixed effects, and a Bartik employment shock based on 3-digit NAICS employment shares. Thus, our identifying assumption is that, following a positive stock return, areas with high stock market wealth do not experience unu”
- Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages? (2020, unknown): “(2007), Farhi and Werning (2016), Auclert et al. (2018), Bilbiie (2019)).”
- Monetary Policy and the Redistribution Channel (2017, unknown): “29 See also Auclert et al. (2017) for an alternative approach that generalizes theorem 3 to shocks with arbitrary persistence and general equilibrium.”
- The Fiscal Multiplier (2019, unknown): “, Baxter and King, 1993; Heathcote, 2005; Brinca et al., 2016; Ferriere and Navarro, 2018) assumes flexible prices. This framework is limited in its ability to provide a full assessment as only the supply but not the demand channel is operative—that is, the first essential element is not present. An”
- MPC Heterogeneity and Household Balance Sheets (2016, unknown): “6 Other examples are Leth-Petersen (2010), who studies the impact of a credit market reform on consumption in Denmark; Aydin (2015), who studies exogenously varying credit limits in a European retail bank; Baker (2018), who studies the interaction between household balance sheets, income, and consum”