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.
"HANK Comes of Age: Monetary Policy with Heterogeneous Overlapping Generations " with Bence Bardóczy and Mateo Velásquez-Giraldo
R&R JPE MACRO Latest Version - December 2025
We study the transmission and distributional effects of monetary policy in an environment where consumption-saving choices reflect both precautionary motives and life-cycle considerations. Age emerges as a key state variable that links multiple dimensions of heterogeneity: young households tend to have low wealth, high marginal propensities to consume, and strongly procyclical hours. In our quantitative model that matches these facts, monetary policy operates primarily by stimulating investment, boosting labor demand for young workers who consume most of their additional income. Wealthy retirees are affected by the repricing of financial assets and persistently low future returns. However, the effect on the consumption and welfare of most retirees is small because they hold little financial wealth.