Spend or Invest? Analyzing MPC Heterogeneity Across Three Stimulus Waves

Abstract

Using transaction data from a U.S. account aggregator, I study how household balance-sheet conditions drive within-person variation in marginal propensities to consume, repay debt, and invest across three rounds of pandemic stimulus. Using a machine learning imputation estimator, I measure the sensitivity of responses to time-varying financial circumstances. Spending responses fall as liquid assets increase, while debt repayments crowd out consumption only for those with binding borrowing limits. Transfers also encourage retail investment in stocks and cryptocurrencies at both intensive and extensive margins. The findings show how liquidity constraints and debt overhang influence the allocation of transfers across spending, deleveraging, and financial assets.