Because the wealthy hand-to-mouth have little liquid wealth they react strongly to transitory income shocks and therefore have high MPCs.
[3][4] They argue that monetary policy operates mostly via general equilibrium effects on the labor market, instead of the standard intertemporal substitution channel.
This is due to a sizable share of households exhibiting high MPCs, whose spending behavior reacts strongly to changes in disposable income.
As Ricardian equivalence fails in HANK models, the reaction of the fiscal authority to a monetary shock is key to determine the overall macroeconomic response.
In 2022, Andrew Charlton was elected to Australia's House of Representatives as a member of the Australian Labour Party and stepped away from e61 in accordance with its non-partisan nature.