IDEAS home Printed from https://ideas.repec.org/a/aea/aejpol/v11y2019i1p351-79.html
   My bibliography  Save this article

Liquidity Constraint Tightness and Consumer Responses to Fiscal Stimulus Policy

Author

Listed:
  • Claus Thustrup Kreiner
  • David Dreyer Lassen
  • Søren Leth-Petersen

Abstract

The marginal interest rate is the price at which a household can access additional liquidity. Consumption theory posits that variation in marginal interest rates across consumers predicts differences in the propensity to spend a stimulus payment. This hypothesis is tested in the context of a Danish 2009 stimulus policy that transformed illiquid pension wealth into liquid wealth. Marginal interest rates are constructed from administrative records with account level information and merged with survey data measuring the spending response to the stimulus policy. The data reveal substantial variation in marginal interest rates across consumers, and these interest rates predict spending responses.

Suggested Citation

  • Claus Thustrup Kreiner & David Dreyer Lassen & Søren Leth-Petersen, 2019. "Liquidity Constraint Tightness and Consumer Responses to Fiscal Stimulus Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 11(1), pages 351-379, February.
    • Handle: RePEc:aea:aejpol:v:11:y:2019:i:1:p:351-79
    Note: DOI: 10.1257/pol.20140313
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/pol.20140313
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=HjYp9HYLmT3154Ci0qn6yB9VFZdJRtfZ
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=9Hsx2432Eu4F5cdShaixj-n1nUInTGTo
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=RMW1cw3YQXjFjt4I-qSNcdbCDgQjJxWV
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    Citations

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


    Cited by:

    1. Frederik Plesner Lyngse, 2020. "Liquidity Constraints and Demand for Healthcare: Evidence from Danish Welfare Recipients," Papers 2010.14651, arXiv.org.
    2. Frederik Plesner Lyngse, 2020. "Liquidity Constraints and Demand for Healthcare: Evidence from Danish Welfare Recipients," CEBI working paper series 20-28, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    3. Sergio Salas & Kathleen Odell, 2020. "Financial Deepening, Credit Crises, Human Capital and Growth," Working Papers 2020-01, Escuela de Negocios y Economía, Pontificia Universidad Católica de Valparaíso.
    4. Thomas Epper & Ernst Fehr & Helga Fehr-Duda & Claus Thustrup Kreiner & David Dreyer Lassen & Søren Leth-Petersen & Gregers Nytoft Rasmussen, 2020. "Time Discounting and Wealth Inequality," American Economic Review, American Economic Association, vol. 110(4), pages 1177-1205, April.
    5. Momi Dahan & Udi Nisan, 2020. "Late Payments, Liquidity Constraints and the Mismatch between Due Dates and Paydays," CESifo Working Paper Series 8733, CESifo.
    6. d’Astous, Philippe, 2019. "Responses to an anticipated increase in cash on hand: Evidence from term loan repayments," Journal of Banking & Finance, Elsevier, vol. 108(C).

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

    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:aejpol:v:11:y:2019:i:1:p:351-79. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael P. Albert). General contact details of provider: http://edirc.repec.org/data/aeaaaea.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.