March 2022

Gianluca Violante and I finally have a draft of our paper with with on The Marginal Propensity to Consume in Heterogeneous Agent Models. This paper is forthcoming in Annual Reviews of Economics. We conduct a systematic investigation of models with different preferences, dimensions of ex-ante heterogeneity, income processes and asset structure, and show that the most important factor determining the average MPC is the share and type of hand-to-mouth households.