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

March 4, 2022

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Format: Chicago

Bruno Albuquerque, and Georgina Green. Financial Concerns and the Marginal Propensity to Consume in COVID Times: Evidence from UK Survey Data, (USA: International Monetary Fund, 2022) accessed November 21, 2024

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.

Summary

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.

Subject: Consumption, COVID-19, Health, Income, Income shocks, Labor, National accounts, Unemployment

Keywords: Consumption, COVID survey, COVID-19, Elicited MPC, Expectations, Financial concerns, Fiscal policy., Household behaviour, Household expectation, Household income, Income, Income shocks, Marginal propensity to consume, Marginal propensity to consume in COVID times, MPC question, Representative survey, Spending normalisation effect, Survey data, Unemployment

Publication Details

Pages:

52
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/047
Stock No:

WPIEA2022047
ISBN:

9798400203466
ISSN:

1018-5941

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