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 3months. 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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 2271-2304 |
| Number of pages | 34 |
| Journal | Review of Finance |
| Volume | 27 |
| Issue number | 6 |
| DOIs | |
| State | Published - Nov 1 2023 |
Funding
The authors wish to thank Sylvain Catherine, Arpit Gupta, Jonathan Parker, and Joe Vavra for helpful discussion and comments as well as seminar participants at the MoFiR Banking Workshop, CEPR New Consumption Data Conference, Virtual AFFECT seminar, CEPR HF seminar, Toulouse School of Economics, Columbia Graduate School of Business, University of Chicago Booth School of Business, and the Federal Reserve Bank of Philadelphia. Constantine Yannelis is grateful to the Fama Miller Center for generous financial support. R.A. Farrokhnia is grateful to Advanced Projects and Applied Research in Fintech at Columbia Business School for support. Steffen Meyer gratefully acknowledges support from the Danish Finance Institute (DFI). The authors would like to thank Suwen Ge, Spyros Kypraios, Rebecca Liu, and Sharada Sridhar for excellent research assistance. The authors are grateful to SaverLife for providing data access and conducting their user survey. The authors wish to thank Sylvain Catherine, Arpit Gupta, Jonathan Parker, and Joe Vavra for helpful discussion and comments as well as seminar participants at the MoFiR Banking Workshop, CEPR New Consumption Data Conference, Virtual AFFECT seminar, CEPR HF seminar, Toulouse School of Economics, Columbia Graduate School of Business, University of Chicago Booth School of Business, and the Federal Reserve Bank of Philadelphia. Constantine Yannelis is grateful to the Fama Miller Center for generous financial support. R.A. Farrokhnia is grateful to Advanced Projects and Applied Research in Fintech at Columbia Business School for support. Steffen Meyer gratefully acknowledges support from the Danish Finance Institute (DFI). The authors would like to thank Suwen Ge, Spyros Kypraios, Rebecca Liu, and Sharada Sridhar for excellent research assistance. The authors are grateful to SaverLife for providing data access and conducting their user survey.
Keywords
- CARES
- COVID-19
- Consumption
- Household finance
- MPC
- Stimulus
- Survey data
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
