Work

Liquidity Constraint Tightness and Consumer Responses to Fiscal Stimulus Policy

Year: 2019

Type: article

Abstract: The marginal interest rate is the price at which a household can access additional liquidity. Consumption theory posits that variation in marginal interest rates across consumers predicts differences in the propensity to spend a stimulus payment. This hypothesis is tested in the context of a Danish 2009 stimulus policy that transformed illiquid pension wealth into liquid wealth. Marginal interest rates are constructed from administrative records with account level information and merged with survey data measuring the spending response to the stimulus policy. The data reveal substantial variation in marginal interest rates across consumers, and these interest rates predict spending responses. (JEL D14, D15, E21, E43, E62)

Source: American Economic Journal Economic Policy

DOI: 10.1257/pol.20140313

Authors: Claus Thustrup Kreiner, David Dreyer Lassen, Søren Leth-Petersen

Institution: University of Copenhagen

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2187366138

FWCI: 14.03

Cites: 38

Cited by: 40

Related to: 10