IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v104y2014i5p116-21.html

A Tale of Two Stimulus Payments: 2001 versus 2008

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.5.116
    Download Restriction: no
    File URL: http://www.aeaweb.org/aer/ds/10405/P2014_1089_ds.zip
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    References listed on IDEAS

    as
    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.
    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. Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2023. "Earnings business cycles: The Covid recession, recovery, and policy response," Journal of Public Economics, Elsevier, vol. 225(C).
    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. 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.
    4. Diana Alessandrini, 2021. "Progressive Taxation and Economic Stability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(2), pages 422-452, April.
    5. 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.
    6. 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.
    7. Atalay, Kadir & Edwards, Rebecca, 2022. "House prices, housing wealth and financial well-being," Journal of Urban Economics, Elsevier, vol. 129(C).
    8. 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.
    9. 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.
    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.

    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. Monica Paiella, 2007. "The Forgone Gains of Incomplete Portfolios," The Review of Financial Studies, Society for Financial Studies, vol. 20(5), pages 1623-1646, 2007 13.
    2. Mr. Tom Krebs & Mr. Pravin Krishna & Mr. William Maloney, 2013. "Income Mobility and Welfare," IMF Working Papers 2013/024, International Monetary Fund.
    3. Alexander L. Brown & Zhikang Eric Chua & Colin F. Camerer, 2009. "Learning and Visceral Temptation in Dynamic Saving Experiments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 197-231.
    4. Martin Eichenbaum, 2011. "Comment on "Natural Expectations, Macroeconomic Dynamics, and Asset Pricing"," NBER Chapters, in: NBER Macroeconomics Annual 2011, Volume 26, pages 49-60, National Bureau of Economic Research, Inc.
    5. Greg Kaplan & Giovanni L. Violante & Justin Weidner, 2014. "The Wealthy Hand-to-Mouth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(1 (Spring), pages 77-153.
    6. Han, Leyla Jianyu & Kasa, Kenneth & Luo, Yulei, 2024. "Ambiguity, information processing, and financial intermediation," Journal of Economic Theory, Elsevier, vol. 222(C).
    7. Emilio Fernandez-Corugedo, 2004. "Consumption Theory," Handbooks, Centre for Central Banking Studies, Bank of England, number 23, April.
    8. Raj Chetty, 2012. "Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply," Econometrica, Econometric Society, vol. 80(3), pages 969-1018, May.
    9. Jules Binsbergen & Michael Brandt, 2007. "Solving dynamic portfolio choice problems by recursing on optimized portfolio weights or on the value function?," Computational Economics, Springer;Society for Computational Economics, vol. 29(3), pages 355-367, May.
    10. Andersson, Fredrik W., 2011. "The lambda model and "rule of thumb" consumers: An estimation problem in existing studies," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 381-384, August.
    11. Suleyman Basak & Hongjun Yan, 2010. "Equilibrium Asset Prices and Investor Behaviour in the Presence of Money Illusion," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 914-936.
    12. Martin Browning & M. Dolores Collado, 2001. "The Response of Expenditures to Anticipated Income Changes: Panel Data Estimates," American Economic Review, American Economic Association, vol. 91(3), pages 681-692, June.
    13. John H. Cochrane, 1989. "Using Production Based Asset Pricing to Explain the Behavior of Stock Returns Over the Business Cycle," NBER Working Papers 3212, National Bureau of Economic Research, Inc.
    14. Antonella Tutino, 2008. "The rigidity of choice: Lifecycle savings with information-processing limits," Finance and Economics Discussion Series 2008-62, Board of Governors of the Federal Reserve System (U.S.).
    15. Sheng-Cheng Hu, 1996. "Myopia and Social Security Financing," Public Finance Review, , vol. 24(3), pages 319-348, July.
    16. Watanabe, Katsunori & Watanabe, Takayuki & Watanabe, Tsutomu, 2001. "Tax policy and consumer spending: evidence from Japanese fiscal experiments," Journal of International Economics, Elsevier, vol. 53(2), pages 261-281, April.
    17. Melvin Stephens Jr., 2003. ""3rd of tha Month": Do Social Security Recipients Smooth Consumption Between Checks?," American Economic Review, American Economic Association, vol. 93(1), pages 406-422, March.
    18. Rodepeter, Ralf & Winter, Joachim, 1999. "Rules of thumb in life-cycle savings models," Sonderforschungsbereich 504 Publications 99-81, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    19. Ogaki, Masao & Park, Joon Y., 1997. "A cointegration approach to estimating preference parameters," Journal of Econometrics, Elsevier, vol. 82(1), pages 107-134.
    20. Yulei Luo & Eric R. Young, 2010. "Risk-Sensitive Consumption and Savings under Rational Inattention," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 281-325, October.

    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

    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:aea:aecrev:v:104:y:2014:i:5:p:116-21. 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: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.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.