The Micro Anatomy of Macro Consumption Adjustments

Rafael Guntin, Pablo Ottonello, Diego J. Perez

    Research output: Contribution to journalArticlepeer-review


    We study crises characterized by large adjustments of aggregate consumption through their microlevel patterns. We document the cross-sectional patterns of consumption adjustment across the income distribution and find large adjustments for top-income households, who exhibit consumption-income elasticities similar to or larger than the average. We construct a heterogeneous-agent open economy model of consumption under income fluctuations and show that the data patterns are largely consistent with theories that attribute the dynamics of aggregate consumption to changes in aggregate permanent income. We also discuss our findings’ implications for theories based on the tightening of households’ borrowing constraints and analyze policy implications.

    Original languageEnglish (US)
    Pages (from-to)2201-2231
    Number of pages31
    JournalAmerican Economic Review
    Issue number8
    StatePublished - Aug 2023

    ASJC Scopus subject areas

    • Economics and Econometrics


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