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Kiichi Tokuoka

5 February 2014
WORKING PAPER SERIES - No. 1633
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Abstract
A large body of microeconomic evidence supports Friedman (1957)'s proposition that household income can be reasonably well described as having both transitory and permanent components. We show how to modify the widely-used macroeconomic model of Krusell and Smith (1998) to accommodate such a microeconomic income process. Our incorporation of substantial permanent income shocks helps our model to explain a substantial part of the large degree of empirical wealth heterogeneity that is unexplained in the baseline Krusell and Smith (1998) model, even without heterogeneity in preferences.
JEL Code
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions
D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
10 March 2014
WORKING PAPER SERIES - No. 1648
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Abstract
Using new micro data on household wealth from fifteen European countries, the Household Finance and Consumption Survey, we first document the substantial cross-country variation in how various measures of wealth are distributed across individual households. Through the lens of a standard, realistically calibrated model of buffer-stock saving with transitory and permanent income shocks we then study how cross-country differences in the wealth distribution and household income dynamics affect the marginal propensity to consume out of transitory shocks (MPC). We find that the aggregate consumption response ranges between 0.1 and 0.4 and is stronger (i) in economies with large wealth inequality, where a larger proportion of households has little wealth, (ii) under larger transitory income shocks and (iii) when we consider households only using liquid assets (rather than net wealth) to smooth consumption.
JEL Code
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions
D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
Network
Household Finance and Consumption Network (HFCN)
14 March 2014
WORKING PAPER SERIES - No. 1655
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Abstract
We present a macroeconomic model calibrated to match both microeconomic and macroeconomic evidence on household income dynamics. When the model is modified in a way that permits it to match empirical measures of wealth inequality in the U.S., we show that its predictions (unlike those of competing models) are consistent with the substantial body of microeconomic evidence which suggests that the annual marginal propensity to consume (MPC) is much larger than the 0.02_0.04 range implied by commonly-used macroeconomic models. Our model also (plausibly) predicts that the aggregate MPC can differ greatly depending on how the shock is distributed across categories of households (e.g., low-wealth versus high-wealth households).
JEL Code
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions
D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
Network
Household Finance and Consumption Network (HFCN)
25 May 2018
WORKING PAPER SERIES - No. 2152
Details
Abstract
Macroeconomic models often invoke consumption "habits" to explain the substantial persistence of macroeconomic consumption growth. to explain the substantial But a large literature has found no evidence of habits in the micro-economic datasets that measure the behavior of individual households. We show that the apparent conflict can be explained by a model in which consumers have accurate knowledge of their personal circumstances but `sticky expectations' about the macro-economy. In our model, the persistence of aggregate consumption growth reflects consumers' imperfect attention to aggregate shocks. Our proposed degree of (macro) inattention has negligible utility costs, because aggregate shocks constitute only a tiny proportion of the uncertainty that consumers face.
JEL Code
D83 : Microeconomics→Information, Knowledge, and Uncertainty→Search, Learning, Information and Knowledge, Communication, Belief
D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles