[lionhearted]

That's right, yeah.

But here's what they're investigating:

> ”In this paper, we introduce a concept that might be accurately portrayed as “supply creates its own excess demand”. Namely, a negative supply shock can trigger a demand shortage that leads to a contraction in output and employment larger than the supply shock itself."

They've got some time variables; I think an explicit savings variable (and maybe credit, too) would be important in determining whether that'd happen.

I might be mistaken, I tossed some quick thoughts up when this had zero comments, looking at methodology and assumptions moreso than conclusions. But you'd think regions with high-savings, low-savings but lots of credit, and low-savings combined with low credit would behave very differently towards "a contraction in output and employment larger than the supply shock itself."

Math gets way more complicated as you addd variables like that, though, and maybe it wouldn't effect the conclusions too much though, so... ¯\_(ツ)_/¯

[jmalicki]

Also see section 5.4. They use the word liquidity rather than saving - it's not being obtuse, just highly technical vocabulary.

" What happens if firms are liquidity constrained? If firms have some finite amount of liquidity at their disposal, say, because they cannot borrow nor issue equity and have limited past accumulated profits at their disposal, then they no longer maximize the present value of profits in an unconstrained fashion. This distorts firm decisions towards laying workers off, since the current period loss cannot be financed."

[pyromine]

Determining information about Marginal Propensity to Consume directly implies information about Marginal Propensity to Save, as MPC + MPS = 1.