Speaker: Jana Obradovic
Title: Consumption Commitments and the Marginal Propensity to Consume
Abstract: I study how consumption commitments shape households’ marginal propensity to consume out of transitory income shocks. Using transaction data for roughly 60,000 U.S. households from 2014–2021, I exploit mortgage rate-refinancing episodes that mechanically lower required monthly payments and compare MPCs for the same households before and after refinancing. I find that the quarterly MPC falls by about five percentage points after refinancing. I develop a quantitative model with income risk, borrowing constraints, and costly commitment adjustment; in the baseline calibration, higher commitments are associated with larger liquid buffers and lower MPCs, highlighting a tension between the model’s predictions and the empirical evidence.
Maggie Hendrix
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