The Macroeconomic Effect of Stimulus Checks: Evidence from Postwar Veterans’ Payments

Joao Guerreiro, Jonathon Hazell, Diego Känzig and Ed Manuel

No 35786, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Do stimulus checks—one-off, deficit-financed lump-sum payments to households—boost the economy? We study a natural experiment: payments to U.S. veterans after World War II that mimic stimulus checks but were plausibly exogenous to the economy. These payments led to a temporary increase in transfers and a persistent, hump-shaped increase in consumption. The transfer multiplier—the cumulative response of consumption to transfers—reaches 1 after six months and exceeds 2 after a year. The standard heterogeneous-agent New Keynesian model cannot match the hump-shaped consumption response. A version with imperfect expectations—with households underreacting on impact but overreacting at longer horizons—can match our estimates.

JEL-codes: E21 E32 E62 H31 (search for similar items in EconPapers)
Date: 2026-09
Note: EFG ME PE
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