The Economic Impact of the Economic Impact Payments

Tuesday, May 11, 2021

Economics Working Paper 21109

This paper examines the Economic Impact Payments—otherwise known as stimulus checks or recovery rebates—of the three major fiscal packages passed and signed into law in 2020 and 2021 in the United States. The statistical analysis shows that these large one-time temporary payments had a big impact on personal disposable income, but quarterly regressions and simple charts show that they led to little or no increase in consumption and thus did not stimulate the economy. The paper also shows that the findings are much the same as similar studies of other fiscal packages conducted one and two decades ago, and are consistent with the basic economic view of the permanent-income or life cycle hypotheses that temporary increases in income are largely saved in comparison to more permanent changes.

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