We present five facts from an experiment on the marginal propensity to consume (MPC) out
of transitory transfers:(1) the one-month MPC on a cash-like transfer is 23 percent;(2) it is …

Many households hold little wealth. In standard precautionary savings models these
households should not only display higher marginal propensities to consume (MPCs), but …

We study the consumption response to typical labor income shocks and investigate how
these vary by wealth and race. First, we estimate the elasticity of consumption with respect to …

Using detailed account‐level data, this paper explores how financial sophistication affects
consumers' spending responses to changes in income. I document that, controlling for …

We show that the largest increase in unemployment benefits in US history had large
spending impacts and small job-finding impacts. This finding has three implications. First …

Using subjective expectations data from the New York Fed's Survey of Consumer
Expectations (SCE), we estimate the elasticity of intertemporal substitution (EIS)—the …

A large psychology literature argues that, due to selective memory recall, decision-makers'
forecasts of the future are overly influenced by the perceived news. We adopt the diagnostic …

We study the effects of monetary and fiscal policy in a heterogeneous-agent model where
households have present-biased time preferences and naive beliefs. The model features a …

In a canonical intertemporal consumption model, future consumption mistakes (in response
to saving changes) lead to higher current marginal propensities to consume (MPCs). These …

We develop a novel bounded rationality model of imperfect reasoning as the interaction
between automatic (System 1) and analytical (System 2) thinking. In doing so, we formalize …