In today’s keynote address, Professor Carroll has proposed a realistically calibrated economic model with precautionary saving.1 This model matches the uneven distribution of wealth in the data and it is able to replicate the size and the differences across households in the marginal propensity to consume out of transitory income, as reported in the existing literature, to which some participants of this conference have contributed.
Various measures of financial conditions are broadly accommodative relative to historical levels and should remain so. The labor market should strengthen, perhaps significantly, as the virus recedes, social distancing comes to an end, and the service sector springs back to life.