José Mustre-del-Río, Federal Reserve Bank of Kansas City

When a macroeconomic shock arrives, variation in household balance-sheet health (captured by the presence of financial distress “FD"), leads to differential access to credit, and hence a distribution of consumption responses. As we document, though, over the past two recessions, households in prior FD also experienced macroeconomic shocks more intensely than others, leading to a distribution of shock severity. Thus, quantifying the importance of both dimensions of heterogeneity (FD or shock-severity) for consumption requires a structural model. We find that heterogeneity in FD matters more than dispersion in shock-severity for shaping the responses of individual and aggregate consumption to any shock.

DATE: Friday, November 11, 2022

TIME: 3:30-5:00 p.m.

LOCATION: Fronczak 444