Hutchins Roundup: Stimulus checks, Paycheck protection program and more
Hutchins Roundup: Stimulus checks, Paycheck protection program and more

Hutchins Roundup: Stimulus checks, Paycheck protection program and more

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Using data from the Consumer Expenditure Survey on the variation in quantity, receipt, and time of receipt of stimulus checks approved by the CARES Act, Jonathan A. Parker of MIT and co-authors discovered that people spent less of their checks than previously estimated. investigations using other data sources and than in previous episodes. They consider it people spent 10% of their stimulus checks on non-durable goods and services three months after receiving them with little evidence of additional expenses in the following three months or on durable goods;. However, they find significant variations in spending across households: those in the bottom third of the liquidity distribution – households with less than $ 3,000 in cash – spent 20% to 30% of their stimulus checks three months after receipt. In addition, self-reported households mostly spent 14.3% of their stimulus checks using their checks for expenses. The authors conclude that compared to other periods of economic hardship, “the pandemic limited the types of goods and services one could spend on, and many households reduced spending.”

David Autor of MIT and co-authors estimate that the Paycheck Protection Program (PPP) loan issued in 2020 saved about 3 million job years after the start of the pandemic, at an average cost of $ 169,000 per year. job year. No more than a third of these expenses went to workers who would otherwise have lost their jobs; 66% to 77% of the money accrued instead in the form of windfall to business owners and shareholders who would have been able to maintain employment without PPP. As a consequence, about three-quarters of the PPP benefits went to households in the top fifth of the income distribution as opposed to the more evenly distributed benefits from stimulus checks and extended unemployment insurance. Author and co-authors argue that PPP’s lack of targeting of struggling companies was necessary to distribute funds quickly due to the lack of administrative infrastructure to determine the need. “An important part of the PPP experience is that building U.S. administrative capacity ahead of the next pandemic or other large-scale economic emergency would allow for a greatly improved targeting of either employment subsidies or corporate liquidity when the need arises again.”

Cairon Shayne Garcia and Benjamin Cowan of Washington State University find that pandemic-induced school closures had little effect on whether parents of young children worked at all, but reduced the number of hours they worked. Using data from the Current Population Survey and county-level data on school closures, the authors find that when schools were closed, mothers and fathers worked 1.5 to 2 hours fewer each week and were less likely to work full-time than those without children in school age. The reduction in hours was similar for men and women, but was much more pronounced for parents without a college degree. People with less education (who tend to work personally and have lower wages) may have been less able to switch to teleworking or arrange alternative childcare schemes, the authors suggest. While the additional childcare burden caused by the pandemic did not appear to cause parents to leave the labor market, it affected disproportionately vulnerable populations and exacerbated inequalities, the authors conclude.

Line chart showing the percentage change in retail sales from February 2020 over the period January 2020 to December 2021

Source: The Wall Street Journal

“Stablecoins are cryptocurrencies that base their value on collateral, often in the form of deposits with commercial banks or other regulated financial instruments. They piggyback thus on the credibility of sovereign currencies. Stablecoins are issued in this first scenario by big technologies or big companies whose primary activity is digital services … But stablecoins may not be healthy money. One downside is that they have to tie their value to regulated assets to borrow their credibility. Their issuers have an inherent incentive to invest reserve assets in a risky way to achieve a return. Without proper regulation, issuers can deviate from full support or test the margins of what counts as a safe asset – as experience has repeatedly shown. More fundamentally, decentralization has a cost. Confidence in an anonymous system is maintained by self-interested validators who ensure the integrity of the general ledger in the absence of a central authority. ” says Agustín Carstens, General Manager of the Bank of International Settlements.

“Trust in money remains the basis of stability … The core of this system is central banks. They do not aim for profit, but to serve society. They have no commercial interest in personal data. They act as operators, monitors and catalysts in payment markets. and regulates and supervises private providers in the public interest.By working together, they can supply central bank digital currencies (CBDCs) Unlike stack coins, CBDCs do not have to borrow their credibility. they inherit the trust that the public already has in their currency, so they can serve as a solid foundation for future innovation … [C]Central banks and public authorities are still the glue that holds the monetary and financial system together. Private sector services and innovation are essential and should thrive on this basis. But trust can never be outsourced or automated. ”


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