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This paper studies how and why households adjust their spending, saving, and borrowing in response to transitory income shocks. We leverage new large-scale survey data to first quantitatively assess households' intertemporal marginal propensities to consume (MPCs) and deleverage (MPDs) (the...
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Keynesian model. Relative to Representative Agent (RANK) models, our framework introduces a precautionary-savings channel, as … propensities to consume (MPC). While both channels amplify the size of spillovers/spillbacks, only precautionary savings can change …
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