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Helicopter money in Europe: New evidence on the marginal propensity to consume across European households

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  • Drescher, Katharina
  • Fessler, Pirmin
  • Lindner, Peter

Abstract

The recent spread of COVID-19 has led to the worst economic crisis since the 1930s. To boost demand after the crisis, direct monetary transfers to households are being discussed. Using novel microdata from the Eurosystem Household Finance and Consumption Survey (HFCS), we study how much of such a transfer households would actually spend. We do so by exploiting the unique opportunity that the new wave of the survey included an experimental question to calculate the marginal propensity to consume from hypothetical windfall gains. Our results show that households on average spend between about 33% (the Netherlands) and 57% (Lithuania) of such a transfer. In all countries, answers are clustered at spending nothing, spending 50% and spending everything. Marginal propensities to consume decrease with income but are not as clearly related to wealth.

Suggested Citation

  • Drescher, Katharina & Fessler, Pirmin & Lindner, Peter, 2020. "Helicopter money in Europe: New evidence on the marginal propensity to consume across European households," Economics Letters, Elsevier, vol. 195(C).
    • Handle: RePEc:eee:ecolet:v:195:y:2020:i:c:s0165176520302603
    DOI: 10.1016/j.econlet.2020.109416
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    Cited by:

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    2. Marcello Nieddu & Marco Raberto & Andrea Teglio, 2025. "The importance of being many: dynamics, interaction and aggregation in a multi-sector economy," Working Papers 2025: 04, Department of Economics, University of Venice "Ca' Foscari".
    3. Andrej Cupak & Martin Cesnak & Jan Klacso & Martin Suster, 2021. "Fates of indebted households during the Corona crisis: Survey results from Slovakia," Working and Discussion Papers OP 2/2021, Research Department, National Bank of Slovakia.
    4. Hugo S. Gonçalves & Sérgio Moro, 2023. "On the economic impacts of COVID‐19: A text mining literature analysis," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 375-394, February.
    5. Roberto Tamborini, 2024. "Inflation surprises in a New Keynesian economy with a “true” consumption function," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1192-1215, July.
    6. Crossley, Thomas F. & Fisher, Paul & Levell, Peter & Low, Hamish, 2023. "Stimulus payments and private transfers," Economics Letters, Elsevier, vol. 222(C).
    7. Kristijan Krstic & Ronny Westerman & Vijay Kumar Chattu & Natalia V. Ekkert & Mihajlo Jakovljevic, 2020. "Corona-Triggered Global Macroeconomic Crisis of the Early 2020s," IJERPH, MDPI, vol. 17(24), pages 1-9, December.
    8. Coccia, Samantha & Russo, Alberto, 2025. "Inflation, inequality and financial vulnerability: Monetary vs. fiscal policy in the face of an energy shock," Energy Economics, Elsevier, vol. 143(C).
    9. Ignacio Belloc & José Alberto Molina, 2026. "Households with insufficient liquid assets: Consumption responses to income changes," Boston College Working Papers in Economics 1107, Boston College Department of Economics.
    10. Albacete, Nicolas & Fessler, Pirmin & Pekanov, Atanas, 2025. "The role of MPC heterogeneity for fiscal policy in the euro area," Journal of Macroeconomics, Elsevier, vol. 86(C).
    11. Laurens Cherchye & Thomas Demuynck & Bram Rock & Mariia Kovaleva & Geoffrey Minne & Maite De Sola Perea & Frederic Vermeulen, 2024. "Poor and wealthy hand-to-mouth households in Belgium," Review of Economics of the Household, Springer, vol. 22(3), pages 909-934, September.
    12. Alina CIUREA (MECA), 2022. "Impact of European Union Social Policy during Pandemic on Household Income," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 117-124.
    13. Andre, Peter & Flynn, Joel P. & Nikolakoudis, George & Sastry, Karthik A., 2024. "Quick-fixing: Near-rationality in consumption and savings behavior," SAFE Working Paper Series 434, Leibniz Institute for Financial Research SAFE.
    14. Dzung Bui & Lena Draeger & Bernd Hayo & Giang Nghiem, 2022. "The Marginal Propensity to Consume During the COVID-19 Pandemic: Evidence from Thailand and Vietnam," MAGKS Papers on Economics 202207, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    15. Apostolos Fasianos & Reamonn Lydon, 2022. "Do households with debt cut back their consumption more? New evidence from the United Kingdom," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 737-760, July.
    16. Bernard, René, 2022. "Mental Accounting and the Marginal Propensity to Consume," VfS Annual Conference 2022 (Basel): Big Data in Economics 264186, Verein für Socialpolitik / German Economic Association.
    17. Krzysztof Waliszewski & Anna Warchlewska, 2021. "Comparative analysis of Poland and selected countries in terms of household financial behaviour during the COVID-19 pandemic," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(3), pages 577-615, September.
    18. Roberto Tamborini, 2023. "Inflation surprises in a New Keynesian economy with a true consumption function. The Eurozone as an inflation target zone," DEM Working Papers 2023/1, Department of Economics and Management.
    19. Bernard, René, 2023. "Mental accounting and the marginal propensity to consume," Discussion Papers 13/2023, Deutsche Bundesbank.
    20. Ezra Karger & Aastha Rajan, 2020. "Heterogeneity in the Marginal Propensity to Consume: Evidence from Covid-19 Stimulus Payments," Working Paper Series WP 2020-15, Federal Reserve Bank of Chicago.

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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D10 - Microeconomics - - Household Behavior - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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