Pandemic - Consumption Response
Analysis of the household consumption response to the Covid-19 crisis and the CAREs Act response
Analysis of the household consumption response to the Covid-19 crisis and the CAREs Act response.
To predict the eﬀects of the 2020 U.S. ‘CARES’ act on consumption, we extend a model that matches responses of households to past consumption stimulus packages. The extension allows us to account for two novel features of the coronavirus crisis. First, during the lockdown, many types of spending are undesirable or impossible. Second, some of the jobs that disappear during the lockdown will not reappear when it is lifted. We estimate that, if the lockdown is short-lived, the combination of expanded unemployment insurance beneﬁts and stimulus payments should be suﬃcient to allow a swift recovery in consumer spending to its pre-crisis levels. If the lockdown lasts longer, an extension of enhanced unemployment beneﬁts will likely be necessary if consumption spending is to recover.
Click on the launch binder link below to look at the dashboard which lets you modify any of our assumptions one-by-one and explore the consquences to the consumption response.