Studies from Board of Governors Federal Reserve Reveal New Findings on Economics (Micro Mpcs and Macro Counterfactuals: the Case of the 2008 Rebates*): Economics

2025 APR 29 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Investigators publish new report on Economics. According to news reporting from Washington, District of Columbia, by NewsRx editors, the research stated, “We present evidence that the high estimated marginal propensities to consume (MPCs) from the leading household studies result in implausible macroeconomic counterfactuals. Using the 2008 tax rebate as a case study, we calibrate a standard macro model with the estimated micro MPCs to construct counterfactual macroeconomic consumption paths in the absence of a rebate.”

Financial support for this research came from National Science Foundation (NSF).

The news correspondents obtained a quote from the research from the Board of Governors Federal Reserve, “The counterfactual paths imply that consumption expenditures would have plummeted in spring and summer 2008 and mostly recovered in September 2008. We use narratives and forecasts to argue that these paths are implausible. We show that standard two-way fixed effect estimates of the micro MPCs are upward biased. When we correct for the biases, we estimate smaller micro MPCs using the CEX data than the previous literature. We show that realistic modifications of the model result in general equilibrium forces that dampen rather than amplify micro MPCs.”

According to the news reporters, the research concluded: “The combination of smaller micro MPCs and dampening general equilibrium forces implies general equilibrium consumption multipliers that are below 0.2.”

This research has been peer-reviewed.

For more information on this research see: Micro Mpcs and Macro Counterfactuals: the Case of the 2008 Rebates*. The Quarterly Journal of Economics, 2025. The Quarterly Journal of Economics can be contacted at: Oxford Univ Press Inc, Journals Dept, 2001 Evans Rd, Cary, NC 27513, USA.

Our news journalists report that additional information may be obtained by contacting Jacob D. Orchard, Board of Governors Federal Reserve, Washington, DC 20551, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1093/qje/qjaf015. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

(Our reports deliver fact-based news of research and discoveries from around the world.)