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Samih A Azar
''Measuring the US marginal propensity to consume''
( 2021, Vol. 41 No.2 )
The marginal propensity to consume (MPC) is a crucial variable in macroeconomics, and is critical for calculating the income effects of a given fiscal policy stance. This paper computes for the US three degrees of MPC: immediate, or instantaneous, intermediate, or after a lag of one year, and long term, at the steady-state. All three are statistically significant and they sway gradually from lowest to highest. Although the evidence on co-integration between actual income and actual consumption is weak, the Error-Correction Model and a bootstrapping procedure permit a very strong reversal of the evidence.
Keywords: marginal propensity to consume, macroeconomics, disposable income, consumption, co-integration, bootstrapping, United States
JEL: E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
Manuscript Received : Sep 06 2020 Manuscript Accepted : Apr 09 2021

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