Time Variation in Lifecycle Consumption and Income

We document that government spending multipliers depend on the population age structure. Using the variation in military spending and birth rates across US states, we show that the local fiscal multiplier is 1.5 and increases with the population share of young people, implying multipliers of 1.1–1.9 in the interquartile range. A parsimonious life cycle open economy New Keynesian model with credit market imperfections and age-specific differences in labor supply and demand explains 87 percent of the relationship between local multipliers and demographics. The model implies that the US population aging between 1980 and 2015 caused a 38 percent drop in national government spending multipliers. (JEL D15, E12, E24, E62, J11, J22, J23)

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The Young, the Old, and the Government: Demographics and Fiscal Multipliers

Basso

Rachedi

2021

American Economic Journal: Macroeconomics

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Time Variation in Lifecycle Consumption and Income

2021

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We document systematic and significant time variation in US lifecycle non-durable consumption profiles. Consumption profiles have consistently become flatter: differences in consumption across generations have decreased. Pooling data across different periods to identify lifecycle profiles masks relevant time variations and may artificially generate hump-shaped consumption age profiles. The main driver behind lifecycle consumption variations are lifecycle income changes, which display similar flattening. Employing a lifecycle model we show changes in income are sufficient to match the movements in consumption. The contributions of credit, housing and interest rates changes are quantitatively small. JEL-Codes: E210, J110.

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Price Setting in Chile: Micro Evidence from Consumer On-Line Prices During the Social Outbreak and Covid-19

Peña¹,

Illanes

2021

SSRN Journal

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In this paper we analyze the price setting behavior in Chile by using scraped data from public websites of the main retailers including supermarkets, a pharmacy retailer and car dealerships. The data collection started in July 2019 and the dataset covers two major recent events: (1) the social outbreak and (2) the state of emergency declaration due to Covid-19, both episodes led to disruptions in the economy. With information on product varieties that accounts for 22% of the CPI basket, we document several empirical findings as regards price setting behaviour in terms of stickiness, that is, frequency, implied duration and the size of price adjustments. We find that in spite of facing large shocks, prices adjusted very little, at a lower frequency and at a smaller size than prior to these two events. We also find that there was a reduction on product variety availability on-line, a typical feature that also has been found during natural disasters such as earthquakes. The reduction in product availability poses additional difficulties to construct CPI indexes and to properly capture price rigidities, which are relevant for monetary policy. * We are very grateful for useful comments to internal seminar participants, both in BoS and the CBCh, and to participants of the Conference on "Non-traditional data and statistical learning with applications to macroeconomics" organized by the Bank of Italy and the Federal Reserve Board and to Isabel Sánchez García. The views expressed herein are those of the authors and do not necessarily reflect the views of Banco de España nor the Central Bank of Chile.

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Time Variation in Lifecycle Consumption and Income

Cited by 4 publications

References 58 publications

The Young, the Old, and the Government: Demographics and Fiscal Multipliers

The Young, the Old, and the Government: Demographics and Fiscal Multipliers

Time Variation in Lifecycle Consumption and Income

Price Setting in Chile: Micro Evidence from Consumer On-Line Prices During the Social Outbreak and Covid-19

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