IDEAS home Printed from https://ideas.repec.org/a/acb/agenda/v20y2013i2p39-60.html

Stimulating Savings: An Analysis of Cash Handouts in Australia and the United States

Author

Listed:
  • Sinclair Davidson
  • Ashton de Silva

Abstract

At the onset of the Global Financial Crisis governments around the world implemented fiscal stimulus packages. A key component of many of these packages was aimed at stimulating consumer spending. In Australia and the United States, for example, households received one-off cash payments. We assess the changes in the macroeconomic levels of consumption and savings of both countries coinciding with the timing of the household bonuses using an econometric time series method known as seemingly unrelated time-series equations. The results suggest that the one-off cash bonuses did not stimulate consumption. On the contrary, the evidence suggests savings was stimulated.

Suggested Citation

  • Sinclair Davidson & Ashton de Silva, 2013. "Stimulating Savings: An Analysis of Cash Handouts in Australia and the United States," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 20(2), pages 39-60.
    • Handle: RePEc:acb:agenda:v:20:y:2013:i:2:p:39-60
    as

    Download full text from publisher

    File URL: http://press-files.anu.edu.au/downloads/press/p269601/pdf/stimulating.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sumit Agarwal & Chunlin Liu & Nicholas S. Souleles, 2007. "The Reaction of Consumer Spending and Debt to Tax Rebates-Evidence from Consumer Credit Data," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 986-1019, December.
    2. de Silva, Ashton & Hyndman, Rob J. & Snyder, Ralph, 2009. "A multivariate innovations state space Beveridge-Nelson decomposition," Economic Modelling, Elsevier, vol. 26(5), pages 1067-1074, September.
    3. Nicholas S. Souleles & Jonathan A. Parker & David S. Johnson, 2006. "Household Expenditure and the Income Tax Rebates of 2001," American Economic Review, American Economic Association, vol. 96(5), pages 1589-1610, December.
    4. Andrew Benito, 2006. "Does job insecurity affect household consumption?," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 157-181, January.
    5. Thorsten Drautzburg & Harald Uhlig, 2015. "Fiscal Stimulus and Distortionary Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 894-920, October.
    6. Leigh Andrew, 2012. "How Much Did the 2009 Australian Fiscal Stimulus Boost Demand? Evidence from Household-Reported Spending Effects," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-24, March.
    7. John B. Taylor, 2011. "An Empirical Analysis of the Revival of Fiscal Activism in the 2000s," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 686-702, September.
    8. Nilss Olekalns, 1997. "Has Financial Deregulation Revived the Permanent Income/Life Cycle Hypothesis?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 30(2), pages 155-166, June.
    9. Anthony J. Makin & Paresh Kumar Narayan, 2011. "How Potent is Fiscal Policy in Australia?," Economic Papers, The Economic Society of Australia, vol. 30(3), pages 377-385, September.
    10. Alan J. Auerbach & William G. Gale & Benjamin H. Harris, 2010. "Activist Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 141-164, Fall.
    11. Matthew D. Shapiro & Joel Slemrod, 2003. "Consumer Response to Tax Rebates," American Economic Review, American Economic Association, vol. 93(1), pages 381-396, March.
    12. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    13. Tommaso Proietti & Alberto Musso & Thomas Westermann, 2007. "Estimating potential output and the output gap for the euro area: a model-based production function approach," Empirical Economics, Springer, vol. 33(1), pages 85-113, July.
    14. Rajashri Chakrabarti & Donghoon Lee & Wilbert van der Klaauw & Basit Zafar, 2013. "Household Debt and Saving during the 2007 Recession," NBER Chapters, in: Measuring Wealth and Financial Intermediation and Their Links to the Real Economy, pages 273-322, National Bureau of Economic Research, Inc.
    15. Emma Aisbett & Markus Brueckner & Ralf Steinhauser & Rhett Wilcox, 2013. "Fiscal Stimulus and Households' Non-Durable Consumption Expenditures: Evidence from the 2009 Australian Nation Building and Jobs Plan," CEPR Discussion Papers 689, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    16. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-247, July-Sept.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sinclair Davidson & Ashton de Silva, 2014. "The Plain Truth about Plain Packaging: An Econometric Analysis of the Australian 2011 Tobacco Plain Packaging Act," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 21(1), pages 27-44.
    2. Hamid Baghestani & Sehar Fatima, 2021. "Growth in US Durables Spending: Assessing the Impact of Consumer Ability and Willingness to Buy," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 17(1), pages 55-69, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruno Martorano, 2015. "Lessons from the recent economic crisis: the Australian household stimulus package," International Review of Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 309-327, May.
    2. Broda, Christian & Parker, Jonathan A., 2014. "The Economic Stimulus Payments of 2008 and the aggregate demand for consumption," Journal of Monetary Economics, Elsevier, vol. 68(S), pages 20-36.
    3. Epanchin-Niell, Rebecca S. & Wilen, James E., 2010. "Optimal control of spatial-dynamic processes: The case of biological invasions," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61375, Agricultural and Applied Economics Association.
    4. Elliot Anenberg & Daniel R. Ringo, 2019. "The Propagation of Demand Shocks Through Housing Markets," Finance and Economics Discussion Series 2019-084, Board of Governors of the Federal Reserve System (U.S.).
    5. Grant Graziani & Wilbert Van der Klaauw & Basit Zafar, 2013. "A boost in the paycheck: survey evidence on workers’ response to the 2011 payroll tax cuts," Staff Reports 592, Federal Reserve Bank of New York.
    6. Vesal, Mohammad, 2017. "Stimulus Effect of a Value-added Tax Cut: Evidence from the UK Tax Returns Data," MPRA Paper 101016, University Library of Munich, Germany.
    7. Ueda, Kozo, 2024. "Household spending responses to two-time COVID-19 payments," Japan and the World Economy, Elsevier, vol. 72(C).
    8. Matthew D. Shapiro & Joel Slemrod, 2009. "Did the 2008 Tax Rebates Stimulate Spending?," American Economic Review, American Economic Association, vol. 99(2), pages 374-379, May.
    9. Kim, Jihee & Lee, Susang, 2024. "Can stimulus checks to households save the local economy? The impact of South Korea’s COVID-19 stimulus on small business sales," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 159-176.
    10. Mark Hoekstra & Steven L. Puller & Jeremy West, 2017. "Cash for Corollas: When Stimulus Reduces Spending," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 1-35, July.
    11. Christelis, Dimitris & Georgarakos, Dimitris & Jappelli, Tullio, 2015. "Wealth shocks, unemployment shocks and consumption in the wake of the Great Recession," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 21-41.
    12. Emma Aisbett & Markus Brueckner & Ralf Steinhauser & Rhett Wilcox, 2025. "A Test of the Permanent Income Hypothesis When Households are Less Constrained," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 57(5), pages 1335-1360, August.
    13. Anna Sokolova, 2023. "Marginal Propensity to Consume and Unemployment: a Meta-analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 813-846, December.
    14. Deniz Aydin, 2015. "The Marginal Propensity to Consume out of Liquidity," Discussion Papers 15-010, Stanford Institute for Economic Policy Research.
    15. Andreas Fagereng & Martin B. Holm & Gisle J. Natvik, 2021. "MPC Heterogeneity and Household Balance Sheets," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 1-54, October.
    16. Rafael R. S. Guimaraes, 2022. "Deep Learning Macroeconomics," Papers 2201.13380, arXiv.org.
    17. Jonathan A. Parker & Nicholas S. Souleles & David S. Johnson & Robert McClelland, 2013. "Consumer Spending and the Economic Stimulus Payments of 2008," American Economic Review, American Economic Association, vol. 103(6), pages 2530-2553, October.
    18. repec:fip:fedkrw:rwp2013-07 is not listed on IDEAS
    19. Sumit Agarwal & Gene Amromin & Souphala Chomsisengphet & Tim Landvoigt & Tomasz Piskorski & Amit Seru & Vincent Yao, 2015. "Mortgage Refinancing, Consumer Spending, and Competition: Evidence from the Home Affordable Refinancing Program," NBER Working Papers 21512, National Bureau of Economic Research, Inc.
    20. Surico, Paolo & Misra, Kanishka, 2011. "Heterogeneous Responses and Aggregate Impact of the 2001 Income Tax Rebates," CEPR Discussion Papers 8306, Centre for Economic Policy Research.
    21. Alan J. Auerbach & William G. Gale, 2009. "Activist fiscal policy to stabilize economic activity," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 327-374.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:acb:agenda:v:20:y:2013:i:2:p:39-60. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/feanuau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.