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Measuring the US marginal propensity to consume

Author

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  • Samih A Azar

    (Haigazian University)

Abstract

The marginal propensity to consume (MPC) is a crucial variable in macroeconomics, and is critical for calculating the income effects of a given fiscal policy stance. This paper computes for the US three degrees of MPC: immediate, or instantaneous, intermediate, or after a lag of one year, and long term, at the steady-state. All three are statistically significant and they sway gradually from lowest to highest. Although the evidence on co-integration between actual income and actual consumption is weak, the Error-Correction Model and a bootstrapping procedure permit a very strong reversal of the evidence.

Suggested Citation

  • Samih A Azar, 2021. "Measuring the US marginal propensity to consume," Economics Bulletin, AccessEcon, vol. 41(2), pages 283-292.
    • Handle: RePEc:ebl:ecbull:eb-20-00896
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2021/Volume41/EB-21-V41-I2-P26.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    marginal propensity to consume; macroeconomics; disposable income; consumption; co-integration; bootstrapping; United States;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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