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The Effects of Fiscal Stimulus: Evidence from the 2009 Cash for Clunkers Program

  • Atif Mian
  • Amir Sufi

We evaluate the impact of the 2009 Cash for Clunkers program on short- and medium-run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex ante exposure to the program as measured by the number of "clunkers" in the city as of summer 2008. We find that the program induced the purchase of an additional 370,000 cars in July and August 2009. However, we find strong evidence of reversal; high clunker counties bought fewer autos in the 10 months after the program expired, which offset most of the initial purchases. We find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program. JEL Codes: H20, E62. Copyright 2012, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/qje/qjs024
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Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 127 (2012)
Issue (Month): 3 ()
Pages: 1107-1142

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Handle: RePEc:oup:qjecon:v:127:y:2012:i:3:p:1107-1142
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  1. 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.
  2. Sumit Agarwal & Chunlin Liu & Nicholas Souleles, 2007. "The reaction of consumer spending and debt to tax rebates; evidence from consumer credit data," Working Papers 07-34, Federal Reserve Bank of Philadelphia.
  3. Alan J. Auerbach & Yuriy Gorodnichenko, 2012. "Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.
  4. Ogaki, Masao & Reinhart, Carmen M., 1998. "Intertemporal substitution and durable goods: long-run data," Economics Letters, Elsevier, vol. 61(1), pages 85-90, October.
  5. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "From Financial Crash to Debt Crisis," NBER Working Papers 15795, National Bureau of Economic Research, Inc.
  6. Daniel J. Wilson, 2010. "Fiscal spending multipliers: evidence from the 2009 American Recovery and Reinvestment Act," Working Paper Series 2010-17, Federal Reserve Bank of San Francisco.
  7. Michael Woodford, 2011. "Simple Analytics of the Government Expenditure Multiplier," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(1), pages 1-35, January.
  8. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2009. "When is the government spending multiplier large?," NBER Working Papers 15394, National Bureau of Economic Research, Inc.
  9. Jonathan A. Parker & Nicholas S. Souleles & David S. Johnson & Robert McClelland, 2011. "Consumer Spending and the Economic Stimulus Payments of 2008," NBER Working Papers 16684, National Bureau of Economic Research, Inc.
  10. Eberly, J.C., 1990. "Adjustment of Consumers'durables Stocks: Evidence from Automobile Purchases," Weiss Center Working Papers 22-91, Wharton School - Weiss Center for International Financial Research.
  11. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1449-1496, November.
  12. Atif R. Mian & Amir Sufi, 2010. "Household Leverage and the Recession of 2007 to 2009," NBER Working Papers 15896, National Bureau of Economic Research, Inc.
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