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A Tale of Two Stimulus Payments: 2001 versus 2008

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  • Greg Kaplan
  • Giovanni L. Violante

Abstract

Fiscal stimulus payments (i.e., direct lump-sum payments from the government to households) were used in the recessions of 2001 and 2008 in an attempt to simultaneously alleviate households' economic hardship and stimulate aggregate demand. Despite the similarities between the two stimulus policies, there were important differences in both their design and the prevailing economic conditions. We use the model of Kaplan and Violante (2013) to compare the consumption response to these policies. Consistent with empirical evidence from microdata, we find that the consumption response was around one-third lower in 2008, primarily due to the larger size of the payments.

Suggested Citation

  • Greg Kaplan & Giovanni L. Violante, 2014. "A Tale of Two Stimulus Payments: 2001 versus 2008," American Economic Review, American Economic Association, vol. 104(5), pages 116-121, May.
    • Handle: RePEc:aea:aecrev:v:104:y:2014:i:5:p:116-21
    Note: DOI: 10.1257/aer.104.5.116
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    References listed on IDEAS

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    1. Cochrane, John H, 1989. "The Sensitivity of Tests of the Intertemporal Allocation of Consumption to Near-Rational Alternatives," American Economic Review, American Economic Association, vol. 79(3), pages 319-337, June.
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    Cited by:

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    2. Xinkuo Xu & Liyan Han, 2017. "Diverse Effects of Consumer Credit on Household Carbon Emissions at Quantiles: Evidence from Urban China," Sustainability, MDPI, vol. 9(9), pages 1-25, September.
    3. Gustav Engström & Johan Gars & Niko Jaakkola & Therese Lindahl & Daniel Spiro & Arthur A. van Benthem, 2020. "What Policies Address Both the Coronavirus Crisis and the Climate Crisis?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 789-810, August.
    4. Fuchs-Schündeln, N. & Hassan, T.A., 2016. "Natural Experiments in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 923-1012, Elsevier.
    5. Chiara Fratto & Harald Uhlig, 2014. "Accounting for Post-Crisis Inflation and Employment: A Retro Analysis," NBER Working Papers 20707, National Bureau of Economic Research, Inc.
    6. Diana Alessandrini, 2021. "Progressive Taxation and Economic Stability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(2), pages 422-452, April.
    7. Chiara Fratto & Harald Uhlig, 2020. "Accounting for Post-Crisis Inflation: A Retro Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 133-153, January.
    8. Radermacher, Jan W., 2023. "Mamma Mia! Revealing hidden heterogeneity by PCA-biplot: MPC puzzle for Italy's elderly poor," SAFE Working Paper Series 382, Leibniz Institute for Financial Research SAFE.
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    10. Sarah D. Asebedo & Taufiq Hasan Quadria & Blake T. Gray & Yi Liu, 2022. "The Psychology of COVID-19 Economic Impact Payment Use," Journal of Family and Economic Issues, Springer, vol. 43(2), pages 239-260, June.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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