Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/310355 
Year of Publication: 
2024
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 443
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
We elicit the intertemporal Marginal Propensity to Consume (iMPC) based on hypothetical different size lottery winnings through questions in the 2023-24 Italian Survey of Consumer Expectations (ISCE). Survey respondents were asked to allocate three hypothetical lottery winning amounts (€1,000, €10,000. and €50,000) between consumption and saving in both the year following the survey and over the longer term. The iMPC for a €1,000 win declines from 26% in the first year to about 1% five years after the shock. Larger win amounts have a smaller impact in the first year and a larger impact in the long run. The iMPC for a €10,000 (€50,000) prize declines from 19% (15%) in the first year to 2.5% (4%) in year five. Regardless of the size of the shock, the iMPC shows a weak negative relation to the cash-on-hand amount and a negative relation to income risk. We show that calibrated simulations of incomplete market models with borrowing constraints, income risk, and household heterogeneity are broadly consistent with these empirical findings.
Subjects: 
Intertemporal Marginal Propensity to Consume
Income Shocks
Shock Size
JEL: 
D12
D14
D15
C8
C99
Document Type: 
Working Paper

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