The Coronavirus Stimulus Package: How large is the transfer multiplier?

Christian Bayer, Benjamin Born, Ralph Luetticke and Müller, Gernot
Authors registered in the RePEc Author Service: Gernot J. Müller

No 14600, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In response to the COVID-19 pandemic, large parts of the economy were locked down and, as a result, households' income risk rose sharply. At the same time, policy makers put forward the largest stimulus package in history. In the U.S., it amounted to $2 trillion, a quarter of which represented transfer payments to households. To the extent that such transfers were i) announced in advance and ii) conditional on recipients being unemployed, they mitigated income risk associated with the lockdown - in contrast to unconditional transfers. We develop a baseline scenario for a COVID-19 recession in a medium-scale HANK model and use counterfactuals to quantify the impact of transfers. For the short run, we find large differences in the transfer multiplier: it is negligible for unconditional transfers and about unity for conditional transfers. Overall, we find that the transfers reduced the output loss due to the pandemic by some 2 percentage points at its trough.

Keywords: Covid-19; Coronavirus; Cares act; Fiscal policy; Stimulus; Conditional transfer; Transfer multiplier; Lockdown; Quarantine (search for similar items in EconPapers)
JEL-codes: D31 E32 E62 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (85)

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Journal Article: The Coronavirus Stimulus Package: How Large is the Transfer Multiplier (2023)
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