Christopher Carroll, Edmund S. Crawley, Jiri Slacalek, Matthew N. White, 14 October 2020

The 2020 US CARES Act aimed to bolster consumer spending. This column tests the effectiveness of the Act by modelling the spending and saving behaviour of households during the COVID-19 pandemic, differentiating between the employed, temporarily unemployed and persistently unemployed. In the case of a short-lived lockdown, it finds that the CARES Act should prompt a swift recovery in consumer spending. If a longer-lasting lockdown is imposed to combat a ‘second wave’ of the virus, an extension of enhanced unemployment benefits will likely be needed.

Olivier Coibion, Yuriy Gorodnichenko, Michael Weber, 08 September 2020

A major component of the 27 March CARES Act in the US was a one-time transfer to all qualifying adults of up to $1200, with $500 per additional child. Using a large-scale survey of US consumers, this column studies how these large transfers affected individuals' consumption, saving and labour supply decisions. Most respondents report that they primarily saved or paid down debts with their transfers, with only about 15% reporting that they mostly spent it. On average, individuals report having spent or planning to spend only around 40% of the total transfer. The payments appear to have had no meaningful effect on labour-supply decisions from these transfer payments, except for 20% of the unemployed who report that the stimulus payment made them search harder for a job.

Christian Bayer, Benjamin Born, Ralph Luetticke, Gernot Müller, 24 April 2020

Among the various measures announced in response to the economic fallout caused by the COVID-19 pandemic, the $2 trillion stimulus package legislated in the US at the end of March 2020 stands out in terms of size. This column quantifies the multiplier of the stimulus’s transfer component. It finds that transfers which top up unemployment benefits are particularly effective because they reduce the income risk due to the lockdown ex ante. In this case, the multiplier may be as high as 2.

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