The Effects of Fiscal Policy on Households during the COVID-19 Pandemic: Evidence from Emerging Economies
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
The Effects of Fiscal Policy on Households during the
COVID-19 Pandemic: Evidence from Emerging
Economies
Dzung Bui1 Lena Dräger2 Bernd Hayo1 Giang Nghiem2
1 Philipps-University of Marburg
2 Leibniz University Hannover
Third Behavioral Macroeconomics Workshop, University of Bamberg
(online)
July 8th , 2021
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 1 / 25Introduction
Many governments provided financial support to households in
response to the global COVID-19 pandemic.
In the emerging economies Vietnam and Thailand, the governments
provided financial support to qualifying individuals:
I Individuals whose jobs were affected by the pandemic
I Poor households (in Vietnam) and farmers (in Thailand)
I Financial assistance ranging from $35 to $240 per month in Vietnam
and up to $412 per month in Thailand (U.S. dollar in PPP in 2019),
for a period of up to three months (April to June 2020).
⇒ This fiscal policy response was unprecedented in both countries
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 2 / 25Research Questions
How does government financial support affect consumer sentiment
and durable spending?
What are the transmission channels?
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 3 / 25Online Survey in Thailand and Vietnam
Online surveys conducted by the GMO-Z.com RUNSYSTEM company
Two online surveys:
I Thailand: 1,320 respondents, May 4-10, 2020
I Vietnam: 1,980 respondents, May 4-9, 2020
I Smaller follow-up survey in December, 2020 (Vietnam: 1,016
re-interviews and Thailand: 1,189 re-interviews)
Both emerging economies from the same region, but differences in
several dimensions (political stability, effect of COVID-19, recent
macroeconomic experience)
We construct population weights based on age, education, and the
share of people living in urban areas.
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 4 / 25The Impact of COVID-19 on Households
A. Job loss B. Income loss C. Concern: Health
80
80 80 60
45
57 43
60 60 45
43
%
%
%
40 40 30
20
12
20 20 15
0 0 0
No Yes No Yes Not Somewhat Very
D. Concern: Job security E. Concern: Personal finance F. Concern: The economy
60 60 60
48 48
43 43 43 44
45 45 45
%
%
%
30 30 30
13
15 15 9 15 8
0 0 0
Not Somewhat Very Not Somewhat Very Not Somewhat Very
Vietnam
A. Job loss B. Income loss C. Concern: Health
77
80 72 80 60
51
44
60 60 45
%
%
%
40 40 30
28
23
20 20 15
5
0 0 0
No Yes No Yes Not Somewhat Very
D. Concern: Job security E. Concern: Personal finance F. Concern: The economy
62
60 60 57
60
48
46
45 45 40 45
34
%
%
%
30 30 30
15 15 15
5 4
3
0 0 0
Not Somewhat Very Not Somewhat Very Not Somewhat Very
Thailand
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 5 / 25Financial Support & the Assessment of Gov’t Reaction
A. Financial support B. Assessment of support to HHs C. Assessment of support to firms
52 49
80 50
70 50
40 40 37
60
31
30 30
%
%
%
40
30
20 17 20 15
20
10 10
0 0 0
No Yes Poor Fair Good Poor Fair Good
D. Trust in government E. Pre-crisis assessment of government
66
50
42
40
50
27
30 25 40
%
%
27
20 30
20
10 4
1 10 7
0
Strongly Neither trust Strongly 0
distrust distrust nor distrust trust trust Poor Fair Good
Vietnam
A. Financial support B. Assessment of support to HHs C. Assessment of support to firms
48
80 50 50
44 43
39
59 40 40
60
41 30 30
%
%
%
40
20 20
13 13
20
10 10
0 0 0
No Yes Poor Fair Good Poor Fair Good
D. Trust in government E. Pre-crisis assessment of government
55
50
50
40
29
40
30 25 24
30
%
30
%
20 15
20 14
10 6
10
0
Strongly Neither trust Strongly 0
distrust distrust nor distrust trust trust Poor Fair Good
Thailand
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 6 / 25Regression Results
Evaluate the marginal effect of a dummy fin supportit for HH’s
receiving financial support in the period May-December, 2020, on:
I Dummy for actual durable spending in the period May-December, 2020
I Dummy for increased planned durable spending in the next 12 months
I Individual index of consumer sentiment (includes forecast horizon of
next 12 months)
Analyze potential mediation channels:
I Macroeconomic expectations
I Satisfaction with and trust in the government during the pandemic
I Personal concerns due to the pandemic
Control for large range of socio-demographic characteristics and
estimate with population weights
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 7 / 25Marginal Effects of Financial Support on Consumption and
Durable Spending
consumer sentiment purchased durables plans to buy durables
(1) (2) (3) (4) (5) (6)
VN TL VN TL VN TL
fin support 0.23*** 0.41*** 0.22*** 0.13** 0.06* 0.05**
(0.06) (0.10) (0.05) (0.05) (0.03) (0.02)
Controls Yes Yes Yes Yes Yes Yes
R2 0.151 0.122
Pseudo R2 0.096 0.067 0.048 0.041
N observations 847 713 847 713 847 713
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 8 / 25Marginal Effects of Financial Support on Macroeconomics
Expectations
inflation expectations unemployment expectations GDP expectations
(1) (2) (3) (4) (5) (6)
VN TL VN TL VN TL
fin support -0.09*** 0.008 -0.05*** -0.08* 0.035 0.04***
(0.02) (0.04) (0.02) (0.05) (0.02) (0.01)
Controls Yes Yes Yes Yes Yes Yes
Pseudo R2 0.037 0.021 0.028 0.016 0.039 0.024
N observations 847 713 847 713 847 713
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 9 / 25Marginal Effects of Financial Support on the Assessment of
and Trust in Gov’t in Dealing with COVID-19
govt support firms govt support households govt trust econ
(1) (2) (3) (4) (5) (6)
VN TL VN TL VN TL
fin support 0.25*** 0.14*** 0.22*** 0.13*** 0.09** 0.05***
(0.05) (0.03) (0.05) (0.03) (0.04) (0.01)
Controls Yes Yes Yes Yes Yes Yes
Pseudo R2 0.072 0.072 0.098 0.068 0.041 0.039
N observations 847 713 847 713 847 713
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 10 / 25Marginal Effects of Financial Support on HH Concerns Due
to COVID-19
concern health concern job concern finance concern eco
(1) (2) (3) (4) (5) (6) (7) (8)
VN TL VN TL VN TL VN TL
fin support -0.19*** -0.03 -0.19*** -0.06 -0.13** -0.07 -0.18*** -0.11**
(0.05) (0.05) (0.05) (0.06) (0.05) (0.05) (0.05) (0.05)
Controls Yes Yes Yes Yes Yes Yes Yes Yes
Pseudo R2 0.059 0.044 0.120 0.041 0.116 0.077 0.044 0.082
N observations 847 713 847 713 847 713 847 713
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 11 / 25The Proportion of Indirect Effects in the Total Effect of
Financial Support on Consumer Sentiment
inflation_expectations
unemployment_expectations
gdp_expectations
govt_support_firms
govt_support_households
govt_trust_econ
concern_health
concern_job
concern_finance
concern_economy
0 20 40 60 80
Percent
Vietnam Thailand
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 12 / 25The Proportion of Indirect Effects in the Total Effect of
Financial Support on Purchased Durables
inflation_expectations
unemployment_expectations
gdp_expectations
govt_support_firms
govt_support_households
govt_trust_econ
concern_health
concern_job
concern_finance
concern_economy
-10 0 10 20 30
Percent
Vietnam Thailand
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 13 / 25The Proportion of Indirect Effects in the Total Effect of
Financial Support on Planned Durable Spending
inflation_expectations
unemployment_expectations
gdp_expectations
govt_support_firms
govt_support_households
govt_trust_econ
concern_health
concern_job
concern_finance
concern_economy
0 50 100 150 200
Percent
Vietnam Thailand
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 14 / 25Discussion
About 30% of surveyed households in Vietnam and 60% in Thailand
had received financial support due to the COVID-19 pandemic by
December 2020
Financial support has economically significant effects on actual and
expected durable spending as well as consumer sentiment
Three channels mediate this effect:
1Stronger optimism about expected macroeconomic outlook
2Higher trust in the government’s ability to deal with the economic
effects of COVID-19
3 Lower personal concerns over health, job security, own and
economy-wide financial/economic situation
⇒ Largest indirect effect on spending from trust in the government
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 15 / 25Discussion
Incorporating individual lagged values from the first wave shows that
long-term effects are up to 20% larger than short-term effects in the
December 2020 wave (not shown)
⇒ Fiscal transfers to household in the two emerging countries
investigated significantly boosts spending, but also increases life
satisfaction (not shown) and economic optimism and helps sustain
trust in the government
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 16 / 25Thank you for your attention!
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 17 / 25Appendix
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 18 / 25Robustness: Including lagged sentiment from first interview
(1) (2)
sentiment – VN sentiment – TL
fin support 0.18*** 0.49***
(0.05) (0.11)
sentimentt−1 0.35*** 0.063
(0.04) (0.06)
Controls Yes Yes
R2 0.292 0.151
N observations 810 539
Note: Demographic controls include job loss, income loss, log of household income per capita, employment
status, urban/rural area, age, age squared, education, gender, marital status, number of children, number
of the old, and subjective health assessment. We report marginal effects of the OLS estimations based on
population weights. Standard errors are in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 19 / 25Robustness: Including lagged macroeconomic expectations
from first interview
inflation expectations unemployment expectations gdp expectations
(1) (2) (3) (4) (5) (6)
VN TL VN TL VN TL
fin support -0.06*** 0.009 -0.03** -0.09* 0.02 0.03**
(0.02) (0.04) (0.01) (0.05) (0.02) (0.01)
Lagged dependent 0.05*** 0.006 0.03*** -0.02 0.05*** 0.0001
variable (0.01) (0.02) (0.01) (0.02) (0.01) (0.00)
Controls Yes Yes Yes Yes Yes Yes
Pseudo R2 0.090 0.024 0.064 0.019 0.089 0.031
N observations 828 630 836 628 831 594
Note: Demographic controls include job loss, income loss, log of household income per capita, employment status, urban/rural area, age, age squared,
education, gender, marital status, number of children, number of the old, and subjective health assessment. We report marginal effects for choosing the
highest answer category from ordered probit estimations based on population weights. Standard errors are in parentheses. * p < 0.10, ** p < 0.05,
*** p < 0.01
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 20 / 25Robustness: Including lagged trust in gov’t from first
interview
govt trust covid econ
(1) (2)
VN TL
fin support 0.03 0.05***
(0.04) (0.02)
Lagged dependent 0.2*** -0.002
variable (0.02) (0.00)
Controls Yes Yes
Pseudo R2 0.144 0.042
N observations 841 677
Note: Demographic controls include job loss, income loss, log of household income per capita,
employment status, urban/rural area, age, age squared, education, gender, marital status, number
of children, number of the old, and subjective health assessment. We report marginal effects
for choosing the highest answer category from ordered probit estimations based on population
weights. Standard errors are in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 21 / 25Assessment and Trust in Gov’t Reaction to COVID-19
govt covid appropriate: Do you think the reaction of the government
to the current COVID-19 outbreak is appropriate or not? [The
reaction is not at all sufficient, The reaction is somewhat insufficient,
The reaction is appropriate, The reaction is somewhat extreme, The
reaction is much too extreme, I don’t know]. govt covid appropriate
is a dummy variable that takes value of unity if the answer is
“appropriate” and zero otherwise.
govt trust covid health: How much do you trust the government to
overcome the COVID-19 pandemic? [Strongly distrust, Somewhat
distrust, Neither trust nor distrust, Somewhat trust, Strongly trust, I
don’t know]
govt trust covid econ: How much do you trust the government to
mitigate the negative side-effects of social distancing on the economy,
such as an increase in unemployment and a fall in production?
[Strongly distrust, Somewhat distrust, Neither trust nor distrust,
Somewhat trust, Strongly trust, I don’t know]
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 22 / 25Inflation and Unemployment Expectations
π e : How do you think prices in general (which are used to measure
the inflation rate) will develop over the next 12 months compared to
the previous 12 months? They will [Decrease a lot, Decrease a little,
Stay about the same, Increase a little, Increase a lot, I do not form
opinions about future general price level, Don’t know.]
u e : How do you think unemployment will develop over the next 12
months compared to the previous 12 months? It will [Decrease a lot,
Decrease a little, Stay about the same, Increase a little, Increase a lot,
I do not form opinions about future unemployment, Don’t know]
y e : How do you think national economic growth (GDP growth) will
develop over the next 12 months compared to the previous 12
months? It will [Decrease a lot, Decrease a little, Stay about the
same, Increase a little, Increase a lot, I do not form opinions about
future economic growth, Don’t know]
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 23 / 25Personal Concerns
concern health: How concerned are you about the effects that COVID-19
might have on your health or the health of other members of your household
[Not at all concerned, Somewhat concerned, Very concerned, Don’t know]
concern job: How concerned are you about the effects that COVID-19
might have on your job security or the job security of other members of your
household [Not at all concerned, Somewhat concerned, Very concerned,
Don’t know]
concern finance: How concerned are you about the effects that COVID-19
might have on the financial situation of your household [Not at all
concerned, Somewhat concerned, Very concerned, Don’t know]
concern econ: How concerned are you about the effects that COVID-19
might have on the economy [Not at all concerned, Somewhat concerned,
Very concerned, Don’t know]
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 24 / 25Consumer Sentiment Index
Consumer sentiment is constructed as a simple average of the following five
questions:
1. Did the current financial situation of your household get better or worse
over the past 12 months? [Got much worse, Got a bit worse, Stayed the
same, Got a bit better, Got much better, Don’t know]
2. How do you think the financial situation of your household will develop
over the next 12 months? [Get much worse, Get a bit worse, Stay the same,
Get a bit better, Get much better, Don’t know]
3. How do you think the national business conditions will develop over the
next 12 months? [Get much worse, Get a bit worse, Stay the same, Get a bit
better, Get much better, Don’t know]
4. How do you think the national economic situation will develop over the
next 5 years? [Get much worse, Get a bit worse, Stay the same, Get a bit
better, Get much better, Don’t know]
5. Generally speaking, do you think now is a good or bad time for people to
buy major household items, such as furniture, a refrigerator, stove,
television, and things like that? [Very bad, Bad, Neither good or bad, Good,
Very good, Don’t know]
Bui, Dräger, Hayo, Nghiem (Marburg, LUH) (Philipps-University
Fiscal Policy of
during
Marburg, Leibniz University Hannover) July 8th , 2021
COVID-19 25 / 25You can also read
