Consumption shows asymmetric response to shocks – BoE paper

Households appear to respond more strongly to temporary negative shocks than positive ones

The Bank of England

UK households tend to respond more strongly to temporary negative income shocks than to temporary positive shocks, according to a staff working paper published by the Bank of England on February 6.

Authors Philip Bunn, Jeanne Le Roux, Kate Reinold and Paolo Surico draw on new survey data in their paper, The consumption response to positive and negative income changes. The marginal propensity to consume (MPC) related to a negative income shock is much higher (0.46–0.68) than that related to a

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