Do COVID-19 Stimulus Payments Stimulate the Economy? Evidence from Card Transaction Data in South Korea

29 Pages Posted: 29 Sep 2020 Last revised: 27 Nov 2020

See all articles by Seonghoon Kim

Seonghoon Kim

Singapore Management University

Kanghyock Koh

Korea University - Department of Economics

Wonjun Lyou

Korea University

Date Written: September 29, 2020

Abstract

We analyze the impact of South Korea’s one-off COVID-19 stimulus payments on spending using high-frequency, offline card transactions data based on 3.42 billion transactions in Seoul. The Korean stimulus payment policy is distinct because the government mandated the payments to be used only in the province of residence and in the pre-specified sectors (e.g., excluding online transactions and large retailers). We find evidence that the stimulus payments increased card spending in Seoul. Consistent with the spending restrictions, the policy impact is driven by Seoul residents and the sectors allowed by the government. The spending response to the stimulus payments are weaker in areas with higher average income and more cumulative COVID-19 cases, suggesting the importance of liquidity constraints and risk avoidance. Our back-of-the-envelope calculation suggests that households spend 29% of stimulus payments in the first six weeks. We also find that the stimulus payments flowed more to the sectors and areas suffered less during the pandemic, making the economic impact of COVID-19 more unequal.

Keywords: COVID-19, pandemic, stimulus payments, card transaction data, difference-in-differences

JEL Classification: D12, E21, H12

Suggested Citation

Kim, Seonghoon and Koh, Kanghyock and Lyou, Wonjun, Do COVID-19 Stimulus Payments Stimulate the Economy? Evidence from Card Transaction Data in South Korea (September 29, 2020). Available at SSRN: https://ssrn.com/abstract=3701676 or http://dx.doi.org/10.2139/ssrn.3701676

Seonghoon Kim

Singapore Management University ( email )

90 Stamford Road
178903
Singapore
6568085465 (Phone)

Kanghyock Koh (Contact Author)

Korea University - Department of Economics ( email )

145 Anam-ro Seongbuk-gu
Seoul, Seoul 02841
Korea, Republic of (South Korea)

Wonjun Lyou

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

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