NC State ICREA-Univ.Pompeu Fabra, University Barcelona GSE, and CREI.

Abstract: This paper studies empirical facts regarding the e¤ects of unexpected changes in aggregate macroeconomic \u85scal policies on consumers that are allowed to di¤er depending on their individual characteristics. We use data from the Consumption Expenditure Survey (CEX) to estimate individual-level impulse responses as well as multipliers for government spending. The main empirical \u85nding of this paper is that unexpected \u85scal shocks have substantially di¤erent e¤ects on consumers depending on their income and age levels. In particular, the wealthiest individuals tend to behave according to the predictions of standard RBC models, whereas the poorest individuals tend to behave according to standard IS-LM (non-Ricardian) models, most likely due to credit constraints. Furthermore, government spending policy shocks tend to decrease consumption inequality