Mpcs, Mpes and Multipliers: A Trilemma for New Keynesian Models
CEPR Discussion Paper No. DP14977
46 Pages Posted: 27 Jul 2020 Last revised: 15 Mar 2021
There are 2 versions of this paper
Mpcs, Mpes and Multipliers: A Trilemma for New Keynesian Models
NBER Working Paper No. w27486
Number of pages: 45
Posted: 13 Aug 2020
Last Revised: 12 Jun 2023
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16
Date Written: June 2020
Abstract
We show that New Keynesian models with frictionless labor supply face a challenge: given standard parameters, they cannot simultaneously match plausible estimates of marginal propensities to consume (MPCs), marginal propensities to earn (MPEs), and fiscal multipliers. A HANK model with sticky wages provides a solution to this trilemma.
JEL Classification: D52, E52, E62, H31
Suggested Citation: Suggested Citation
Auclert, Adrien and Bardóczy, Bence and Rognlie, Matthew, Mpcs, Mpes and Multipliers: A Trilemma for New Keynesian Models (June 2020). CEPR Discussion Paper No. DP14977, Available at SSRN: https://ssrn.com/abstract=3650090
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