Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments*

Scott Baker, Robert A Farrokhnia, Steffen Meyer, Michaela Pagel and Constantine Yannelis

Review of Finance, 2023, vol. 27, issue 6, 2271-2304

Abstract: The 2020 CARES Act directed large cash payments to households. We analyze households’ spending responses using data from a Fintech nonprofit, exploring heterogeneity by income, recent income declines, and liquidity as well as linked survey responses about economic expectations. Households respond rapidly to payments, with spending increasing by about $0.14 per dollar during the first week and plateauing around $0.25–$0.30 over 3 months. In contrast to previous stimulus programs, we see little response of durables spending. Households with lower incomes, greater income declines, and less liquidity display stronger responses whereas households that expect employment losses and benefit cuts display weaker responses.

Keywords: Household finance; CARES; Consumption; COVID-19; Stimulus; MPC; Survey data (search for similar items in EconPapers)
JEL-codes: D14 E21 G51 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (13)

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Working Paper: Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments (2020)
Working Paper: Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments (2020)
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