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Fiscal stimulus and debt burden: evidence from Thailand’s first-car-buyer tax rebate program

Athiphat Muthitacharoen (), Krislert Samphantharak () and Sommarat Chantarat ()
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Athiphat Muthitacharoen: Chulalongkorn University
Krislert Samphantharak: University of California San Diego
Sommarat Chantarat: Bank of Thailand

International Tax and Public Finance, 2019, vol. 26, issue 6, 1383-1415

Abstract: Abstract This paper examines the extent to which a fiscal stimulus involving durable goods induces financial distress and causes debt burden. Using account-level loan data to study the impact of Thailand’s first-car-buyer tax rebate scheme at both individual and postcode levels, we find that the program led to higher loan delinquency and crowded out other loan originations, which are symptoms implied by excessive debt burden. The adverse impacts were more pronounced for passenger car buyers than for truck buyers and there were local negative spillovers to non-participants. Our findings raise questions about the merit of promoting economic growth by inducing debt-fueled spending and suggest that the design of durable goods stimulus policy should focus more on productive business durables than on consumer durables.

Keywords: Fiscal stimulus; Debt burden; Tax rebate; Durable goods; Household debt; Delinquency; Credit bureau data (search for similar items in EconPapers)
JEL-codes: D12 E62 E65 H31 (search for similar items in EconPapers)
Date: 2019
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