Heterogeneity and macroeconomic state dependence in the spending response to stimulus

Woongchan Jeon and Kieran James Walsh

Economics Letters, 2025, vol. 247, issue C

Abstract: We explore how households’ stimulus spending varies by income under different macroeconomic conditions over 2020–2021. We document a shift in the spending distribution from a declining pattern with a high average spending response to a U-shaped one with weaker responses and spending rising with income over much of the distribution. We argue that during crisis times like 2020, binding liquidity constraints render poorer households anxious to consume, while in more normalized economies (2021), they prioritize saving or servicing debts.

Keywords: Marginal propensity to consume; Stimulus payments (search for similar items in EconPapers)
JEL-codes: D12 G51 H31 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176524006013

DOI: 10.1016/j.econlet.2024.112117

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