fiscal-policy

The central finding is that the employment and consumption response to fiscal transfers is approximately 40 to 50 percent larger during the pandemic than when the same transfer is introduced in steady-state conditions. This amplification occurs because borrowing constraints bind more tightly in deeper recessions, so the same dollar transfer relaxes a tighter constraint and delivers a larger behavioral response (Source: Cairo, Fujita & Morales-Jimenez, FEDS Paper, federalreserve.gov).

The authors use CPS/ASEC (Current Population Survey / Annual Social and Economic Supplement) data. They document that the decline in employment during the COVID-19 pandemic was larger for low-income households and tightly linked to the intensity of transfer receipt — a pattern that was absent during the Global Financial Crisis (Source: Cairo, Fujita & Morales-Jimenez, FEDS Paper, federalreserve.gov).

Yes. In the model, transfers were welfare-improving for recipients, with welfare gains diminishing as the size of transfers increases (Source: Cairo, Fujita & Morales-Jimenez, FEDS Paper, federalreserve.gov). The pandemic-era transfers are described as unprecedented in scale and strongly progressive in their distributional structure.