Microeconomics Seminar with Damon Jones (Chicago)

Abstract: In the US, nearly $10 Tr dollars are held in Individual Retirement Accounts (IRAs), which offer tax-subsidized returns on retirement savings, but are made relatively illiquid with 10% penalties on early withdrawals. On the other hand, during times of economic downturn, policymakers often seek ways to increase liquidity for households, both as a form of relief and to stimulate aggregate demand. We explore how withdrawals from these account respond to the removal of the early withdrawal penalty at age 59 and a half. We then discuss how this behavioral response might be an input into evaluating the use of early withdrawal penalty holidays as a tool of fiscal policy.

Seminar will be held Virtually.  Please sign up for our seminars listserv to receive the details.