Working Paper: Spending when illiquid savings become liquid: Evidence from Danish wage earners

Working Paper - September 2020 - No. 161

Authors Andersen, Henrik Yde
Subject Economic activity and employment; household balance sheets; Public finances and fiscal policy
Type Working paper
Year 2020
Published 21 September 2020
This paper offers new empirical evidence on the marginal propensity to consume out of an unanticipated liquidity shock. The results show a 43 dollar spending increase for each 100 dollar increase in liquid resources. The estimated spending patterns are consistent with the notion of wealthy hand-to-mouth behaviour.