Working Paper: NBER ID: w27876
Authors: Christopher D. Carroll; Edmund Crawley; Jiri Slacalek; Matthew N. White
Abstract: To predict the effects of the 2020 U.S. CARES Act on consumption, we extend a model that matches responses to past consumption stimulus packages. The extension allows us to account for two novel features of the coronavirus crisis. First, during lockdowns, many types of spending are undesirable or impossible. Second, some of the jobs that disappear during the lockdown will not reappear. We estimate that, if the lockdown is short-lived (the median point of view as we are writing in April 2020), the combination of expanded unemployment insurance benefits and stimulus payments should be sufficient to allow a swift recovery in consumer spending to pre-crisis levels. If the lockdown lasts longer (or there is a ‘second wave’), an extension of enhanced unemployment benefits will likely be necessary for consumption spending to recover quickly.
Keywords: CARES Act; consumption response; stimulus payments; unemployment benefits
JEL Codes: D14; D83; D84; E21; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CARES Act (H84) | consumption recovery (E21) |
| unemployment benefits (J65) | consumption recovery (E21) |
| stimulus payments (E65) | consumption recovery (E21) |
| CARES Act (H84) | consumption of normal unemployed (J64) |
| CARES Act (H84) | consumption of deeply unemployed (J64) |
| stimulus checks (E62) | savings of households (D14) |