We develop a Keynesian model of aggregate consumption. Our theory emphasizes the importance of the relative income hypothesis and debt-finance for understanding household consumption behavior. It is shown that particular importance attaches to how net debtor households service their debts, and...

Government deficits financed by domestic borrowing were found to crowd out private borrowing and spending by consumers and businesses, in both recession and non-recession periods. Deficits due to tax cuts had a net negative effect on GDP, because stimulus effects are smaller than the crowd out...

The outbreak of the financial crisis in 2008 witnessed a marked contraction in US consumption spending that had hitherto been boosted by historically high levels of household debt-financing. These events question the validity of conventional models of consumption based on the life-cycle...

This paper has two main goals. The first is to show that behavioral rather than maximizing principles emerge from textual analysis as the microeconomic foundations for Keynes’s Consumption Theory; the second goal is to demonstrate that it is possible to ground a Keynesian-type aggregate...

This paper tests whether the Ricardian Equivalence proposition holds in a life cycle consumption laboratory experiment. This proposition is a fundamental assumption underlying numerous studies on intertemporal choice and has important implications for tax policy. Using nonparametric and panel...

This paper tests whether the Ricardian Equivalence proposition holds in a life cycle consumption laboratory experiment. This proposition is a fundamental assumption underlying numerous studies on intertemporal choice and has important implications for tax policy. Using nonparametric and panel...

Over the last 15 years, the typical household has increasingly concentrated its spending on a few preferred products. However, this is not driven by "superstar'' products capturing larger market shares. Instead, households increasingly purchase different products from each other. As a result,...

This paper presents a novel method to estimate the depreciation rate of durable goods using a combination of identified marginal and average spending shares. We apply our method to Chinese spending responses to disposable income changes induced by monetary policy in 2008-2009. The marginal...

Using a macro quantile factor model, we examine cross-state (i.e., cross-quantile) heterogeneity in consumption behaviors. We find that common macro factors generate a “big bang/crunch” effect on micro consumption. Generally speaking, when the aggregate effect of the common factors on the...

Using information in returns we identify the stochastic process of consumption – the crucial ingredient of most macro-finance models. We find that aggregate consumption reacts over multiple quarters to innovations spanned by financial markets, and this persistent component accounts for 26% of...