CIE Seminar- Daniel Murphy (Darden, UVA)
De 14.00 a 15.30 h
Sala de Seminarios, Santa Teresa
The Center for Economic Research (CIE) invites you to the seminar: "A Model of Expenditure Shocks"
Presented by: Daniel Murphy (Darden, UVA).
The seminar will take place on October 31 from 2:00 p.m. to 3:30 p.m. in the Santa Teresa Seminar Room.
Abstract:
We introduce a new quantitative model of household expenditure shocks to rationalize the common anecdote of a low-income and low-liquidity household that uses additional income to save (repay debt) rather than consume. Our model also rationalizes key features of the joint dynamics of household-level consumption and income, including our finding that consumption is volatile yet disconnected from income. The key feature of our model is stochastic consumption thresholds that yield large utility costs if violated. The stochastic thresholds increase the welfare cost of income fluctuations by an order of magnitude.
