DP14977 MPCs, MPEs and Multipliers: A Trilemma for New Keynesian Models
Author(s): | Adrien Auclert, Bence Bardóczy, Matthew Rognlie |
Publication Date: | June 2020 |
Date Revised: | July 2020 |
Keyword(s): | Fiscal multipliers, HANK, MPC, MPE |
JEL(s): | D52, E52, E62, H31 |
Programme Areas: | Monetary Economics and Fluctuations |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=14977 |
We establish an impossibility result for New Keynesian models with a frictionless labor market: these models cannot simultaneously match plausible estimates of marginal propensities to consume (MPCs), marginal propensities to earn (MPEs), and fiscal multipliers. Sticky wages provide a solution to this trilemma.