Modeling the Consumption Response to the CARES Act

Christopher Carroll, Edmund Crawley, Jiri Slacalek and Matthew White ()

No 2020-077, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: To predict the effects of the 2020 U.S. CARES act on consumption, we extend a model that matches responses of households to past consumption stimulus packages. The extension allows us to account for two novel features of the coronavirus crisis. First, during the lockdown, many types of spending are undesirable or impossible. Second, some of the jobs that disappear during the lockdown will not reappear when it is lifted. We estimate that, if the lockdown is short-lived, the combination of expanded unemployment insurance benefits and stimulus payments should be sufficient to allow a swift recovery in consumer spending to its pre-crisis levels. If the lockdown lasts longer, an extension of enhanced unemployment benefits will likely be necessary if consumption spending is to recover.

Keywords: Consumption; Coronavirus; Stimulus (search for similar items in EconPapers)
JEL-codes: D83 D84 E21 E32 (search for similar items in EconPapers)
Pages: 27 p.
Date: 2020-08-31
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 (9)

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https://www.federalreserve.gov/econres/feds/files/2020077pap.pdf (application/pdf)

Related works:
Journal Article: Modeling the Consumption Response to the CARES Act (2021)
Working Paper: Modeling the consumption response to the CARES Act (2020)
Working Paper: Modeling the Consumption Response to the CARES Act (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2020-77

DOI: 10.17016/FEDS.2020.077

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