COVID | Economics & Growth | Fiscal Policy | US
Stimulus Checks Fuelled Speculation During the Pandemic
- By Sam van de Schootbrugge
- 7 min read
Summary
- Researchers from Harvard Business School and NYU Stern examine how US stimulus checks impacted stock prices during the pandemic.
- They find that on the days households received their payments, the number of US retail-initiated trades grew 8%.
- And for every 1% inflow from these stimulus checks, the prices of popular retail stocks increased 2-4%.
Introduction
Government mandates changed during the pandemic. Policies pivoted from being mainly redistributive to being the primary driver of economic growth and stability. Unless the long-term interest rate permanently shifts away from zero, governments will lean on fiscal policies again in the next recession (and we think one could be coming). So, what can we learn from their influence last time?
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