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Heterogeneous Consumers and Fiscal Policy Shocks

Listed author(s):
  • Emily Anderson
  • Atsushi Inoue
  • Barbara Rossi

This paper studies empirical facts regarding the effects of unexpected changes in aggregate macroeconomic fiscal policies on consumers that are allowed to di€er depending on their individual characteristics. We use data from the Consumption Expenditure Survey (CEX) to estimate individual-level impulse responses as well as multipliers for government spending. The main empirical finding of this paper is that unexpected fiscal shocks have substantially different effects on consumers depending on their income and age levels. In particular, the wealthiest individuals tend to behave according to the predictions of standard RBC models, whereas the poorest individuals tend to behave according to standard IS-LM (non-Ricardian) models, most likely due to credit constraints. Furthermore, government spending policy shocks tend to decrease consumption inequality. Forthcoming in Journal of Money, Credit and Banking

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 822.

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Date of creation: Feb 2015
Handle: RePEc:bge:wpaper:822
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