Liquidity Constraint Tightness and Consumer Responses to Fiscal Stimulus Policy

Claus Kreiner, David Lassen and Søren Leth-Petersen

American Economic Journal: Economic Policy, 2019, vol. 11, issue 1, 351-79

Abstract: The marginal interest rate is the price at which a household can access additional liquidity. Consumption theory posits that variation in marginal interest rates across consumers predicts differences in the propensity to spend a stimulus payment. This hypothesis is tested in the context of a Danish 2009 stimulus policy that transformed illiquid pension wealth into liquid wealth. Marginal interest rates are constructed from administrative records with account level information and merged with survey data measuring the spending response to the stimulus policy. The data reveal substantial variation in marginal interest rates across consumers, and these interest rates predict spending responses.

JEL-codes: D14 D15 E21 E43 E62 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/pol.20140313
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Citations: View citations in EconPapers (17)

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