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SUMMARY:Stimulus through Insurance: the Marginal Propensity to Repay Debt 
 - Davide Melcangi (NY Fed)
DTSTART;VALUE=DATE-TIME:20251106T150000Z
DTEND;VALUE=DATE-TIME:20251106T160000Z
UID:https://talks.ox.ac.uk/talks/id/429f8e7d-8cf4-47d1-b022-5ad5611511f9/
DESCRIPTION:Using detailed microdata\, we document that households often u
 se "stimulus'' checks to pay down debt\, especially those with low net wea
 lth-to-income ratios. To rationalize these patterns\, we introduce an empi
 rically plausible borrowing price schedule into an otherwise standard inco
 mplete markets model. Because interest rates rise with debt\, borrowers ha
 ve increasingly larger incentives to use an additional dollar to reduce de
 bt service payments rather than consume. Using our calibrated model\, we t
 hen study whether and how this marginal propensity to repay debt (MPRD) al
 ters the aggregate implications of fiscal transfers. We uncover a trade-of
 f between stimulus and insurance\, as high--debt individuals gain consider
 ably from transfers\, but consume relatively little immediately. This mech
 anism lowers the immediate stimulus effect of fiscal transfers\, but susta
 ins aggregate consumption for longer.\nSpeakers:\nDavide Melcangi (NY Fed)
LOCATION:Manor Road Building (Seminar Room C)\, Manor Road OX1 3UQ
TZID:Europe/London
URL:https://talks.ox.ac.uk/talks/id/429f8e7d-8cf4-47d1-b022-5ad5611511f9/
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DESCRIPTION:Talk:Stimulus through Insurance: the Marginal Propensity to Re
 pay Debt - Davide Melcangi (NY Fed)
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