IMF Working Papers Volume 2022 Issue 047: Financial Concerns and the Marginal Propensity to Consume in COVID Times: Evidence from UK Survey Data (2022)

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Financial Concerns and the Marginal Propensity to Consume in COVID Times: Evidence from UK Survey Data

Author:

Bruno Albuquerque

Bruno Albuquerque
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Georgina Green

Georgina Green
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Series:: IMF Working Papers

Volume/Issue:: Volume 2022: Issue 047

Publication Date:: 04 Mar 2022

DOI:: https://doi.org/10.5089/9798400203466.001

ISBN:: 9798400203466

ISSN:: 1018-5941

Pages:: 52

Keywords:: COVID-19; Marginal propensity to consume; Survey data; Household behaviour; Expectations; Financial concerns; Fiscal policy.; representative survey; marginal propensity to consume in COVID times; household expectation; elicited MPC; MPC question; COVID survey; household income; spending normalisation effect; Income shocks; Income; Consumption; Unemployment

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2022: Issue 047

Language:: English

Publication Date:: 04 Mar 2022

DOI:: https://doi.org/10.5089/9798400203466.001

ISBN:: 9798400203466

ISSN:: 1018-5941

Pages:: 52

Keywords:: COVID-19; Marginal propensity to consume; Survey data; Household behaviour; Expectations; Financial concerns; Fiscal policy.; representative survey; marginal propensity to consume in COVID times; household expectation; elicited MPC; MPC question; COVID survey; household income; spending normalisation effect; Income shocks; Income; Consumption; Unemployment

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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We study how household concerns about their future financial situation may affect the marginal propensity to consume (MPC) during the COVID-19 pandemic. We use a representative survey of UK households to compute the MPC from a hypothetical transfer of £500. We find that household expectations play a key role in determining differences in MPCs across households: households concerned about not being able to make ends meet have a 20% higher MPC than other households. Our findings suggest that policies targeted to vulnerable and financially distressed households may prove more effective in stimulating demand than providing stimulus payments to all households.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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