About

Peter Maxted is an Assistant Professor of Finance and a Gerson Bakar Faculty Fellow at Berkeley Haas. His research focuses on financial and macroeconomic issues, including credit card borrowing in heterogeneous-agent models, monetary policy, corporate investment, and household financial behavior. His work often involves developing theoretical frameworks and empirical analyses to reconcile economic theory with real-world data, utilizing supplemental analysis with credit bureau data and examining the effects of behavioral biases such as present bias on household and macroeconomic outcomes. Maxted has contributed to the understanding of consumption choices, macro-finance models with sentiment, and the impact of behavioral biases on economic policy and household welfare.

Research topics

• Economics
• Finance
• Business
• Monetary economics
• Sociology
• Macroeconomics
• Financial system
• Econometrics
• Medicine
• Physical medicine and rehabilitation

Selected publications

• A simple framework for MPCs and MPXs

  London School of Economics and Political Science Research Online (London School of Economics and Political Science) · 2025-12-19

  article1st authorCorresponding
  Publisher

• Present Bias Unconstrained: Consumption, Welfare, and the Present-Bias Dilemma

  The Quarterly Journal of Economics · 2025-07-08 · 6 citations

  article1st authorCorresponding

  Abstract By augmenting the continuous-time specification of Harris and Laibson (2013) with the assumption that hard borrowing constraints do not bind in equilibrium, present bias can be tractably incorporated into rich consumption-saving models featuring stochastic income, risky and illiquid assets, and costly borrowing. I present closed-form expressions characterizing how present bias affects consumption, illiquid asset demand, and welfare. This welfare analysis specifies the channels through which present bias can matter for policy and uncovers the present-bias dilemma: present bias can have large welfare costs, but individuals have little ability to alleviate these costs using financial commitment devices like illiquid assets.

  PublisherDOI

• Present Bias Amplifies the Household Balance-Sheet Channels of Macroeconomic Policy

  The Quarterly Journal of Economics · 2024-09-09 · 16 citations

  articleOpen access1st authorCorresponding

  Abstract We study the effect of monetary and fiscal policy in a heterogeneous-agent model where households have present-biased time preferences and naive beliefs. The model features a liquid asset and illiquid home equity, which households can use as collateral for borrowing. Because present bias substantially increases households’ marginal propensity to consume (MPC), present bias increases the effect of fiscal policy. Present bias also amplifies the effect of monetary policy, but at the same time, slows down the speed of monetary transmission. Interest rate cuts incentivize households to conduct cash-out refinances, which become targeted liquidity injections to high-MPC households. Present bias also introduces a motive for households to procrastinate refinancing their mortgages, which slows down the speed with which this monetary channel operates.

  PublisherOA PDFDOI

• Estimating Discount Functions with Consumption Choices over the Lifecycle

  Review of Financial Studies · 2024 · 126 citations

  • Sociology
  • Economics
  • Econometrics

  Abstract We estimate β-δ time preferences and relative risk aversion (RRA) using a lifecycle model including stochastic income, liquid and illiquid assets, credit cards, dependents, Social Security, mortality, and bequests. Preference parameters are identified by cross-tabulating four lifecycle age intervals and four balance sheet moments: the share of households carrying (ie, revolving) credit card debt, average carried credit card debt, average net wealth among households carrying credit card debt, and average net wealth among households not carrying credit card debt. The 16 moments are approximately matched by (MSM) parameter estimates β=0.53, δ=0.99, and RRA = 1.9.

  PublisherDOI

• Household Borrowing and MPCs in Heterogeneous-Agent Models

  SSRN Electronic Journal · 2023-01-01 · 4 citations

  articleOpen accessSenior author
  PublisherDOI

• The Beta-Delta-Delta Sweet Spot

  SSRN Electronic Journal · 2023-01-01 · 1 citations

  articleOpen accessSenior author
  PublisherDOI

• The Beta-Delta-DELTA Sweet Spot

  National Bureau of Economic Research · 2023-01-01 · 5 citations

  reportOpen accessSenior author

  When solving discrete-time consumption models with present-biased time preferences, backwards induction generates equilibria that are non-robust in the sense that policy functions are often sensitive to parameter choices, including the modeler's choice of the time-step. The current paper identifies a range of "sweet-spot" time-steps that (i) contains the psychologically relevant present bias horizons, and, (ii) generates numerically indistinguishable (i.e., robust) policy functions. This sweet spot includes both a computationally feasible range of discrete-time cases and the limiting continuous-time case (Harris and Laibson, 2013). Accordingly, researchers modeling present bias in buffer stock models can choose either discrete-time cases calibrated to be in the sweet spot or the analytically tractable continuous-time case; these approaches yield essentially identical policy functions.

  PublisherDOI

• A Macro-Finance Model with Sentiment

  The Review of Economic Studies · 2023 · 92 citations

  1st authorCorresponding
  • Economics
  • Monetary economics
  • Finance

  Abstract This paper incorporates diagnostic expectations into a general equilibrium macroeconomic model with a financial intermediary sector. Diagnostic expectations are a forward-looking model of extrapolative expectations that overreact to recent news. Frictions in financial intermediation produce non-linear spikes in risk premia and slumps in investment during periods of financial distress. The interaction of sentiment with financial frictions generates a short-run amplification effect followed by a long-run reversal effect, termed the feedback from behavioural frictions to financial frictions. The model features sentiment-driven financial crises characterized by low pre-crisis risk premia and neglected risk. The conflicting short-run and long-run effect of sentiment produces boom–bust investment cycles. The model also identifies a stabilizing role for diagnostic expectations. Under the baseline calibration, financial crises are less likely to occur when expectations are diagnostic than when they are rational.

  PublisherDOI

• A Simple Mapping from MPCs to MPXs

  National Bureau of Economic Research · 2022-01-01 · 29 citations

  report

  Standard consumption models assume a notional consumption flow that does not distinguish between nondurable and durable consumption.Such notional-consumption models generate notional marginal propensities to consume (MPC).By contrast, empirical work and policy discussions often highlight marginal propensities for expenditure (MPX), which incorporate spending on a durable stock.We compare the notional-consumption model to an isomorphic model with a durable stock, and map notional MPCs into MPXs.The mapping is especially simple for a one-period horizon: MPX = (1 -s + s/(r+d)) x MPC, with durable share s, real interest rate r, and durable depreciation rate d.

  PublisherDOI

• A Simple Mapping from Mpcs to Mpxs

  SSRN Electronic Journal · 2022-01-01

  articleOpen access
  PublisherDOI

Frequent coauthors

• David Laibson

  Harvard University Press

  7 shared

• Benjamin Moll

  3 shared

• David Laibson

  Harvard University

  2 shared

• Sean Chanwook Lee

  Harvard University Press

  2 shared

• John Beshears

  National Bureau of Economic Research

  1 shared

• Jeremy Tobacman

  University of Delaware

  1 shared

• Andrea Repetto

  Pontificia Universidad Católica de Chile

  1 shared

• James J. Choi

  1 shared

Awards & honors

• AQR Top Finance Graduate Award 2021
• David A. Wells Prize for Best Dissertation in Economics 2021
• China Star Tour 2021