Seminar 237, Macroeconomics: "The Micro Anatomy of Macro Consumption Adjustments" (joint with Rafael Guntin and Diego Perez): Joint with International

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Submitted by Brandon Eltiste on January 13, 2022
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597 Evans Hall
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Time:
Tuesday, August 30, 2022 - 16:10
About this Event

Pablo Ottonello, Professor, University of Michigan Department of Economics

Abstract: We study crises characterized by large adjustments of aggregate consumption through their microlevel patterns. We document the cross-sectional patterns of consumption adjustment across the income distribution and find large adjustments for top-income households, who exhibit consumption-income elasticities similar to or larger than the average. We construct a heterogeneous-agent open economy model of consumption under income fluctuations and show that the data patterns are largely consistent with theories that attribute the dynamics of aggregate consumption to changes in aggregate permanent income. We also discuss our findings’ implications for theories based on the tightening of households’ borrowing constraints and analyze policy implications.