The Effects of Fiscal Policy on Households during the COVID-19 Pandemic: Evidence from Emerging Economies

38 Pages Posted: 18 Aug 2022

See all articles by Dzung Bui

Dzung Bui

University of Marburg

Lena Dräger

Leibniz University Hannover

Bernd Hayo

University of Marburg - School of Business & Economics

Giang Nghiem

Leibniz Institute for Financial Research SAFE; Leibniz Universität Hannover

Date Written: August 17, 2022

Abstract

In response to the economic crisis created by the COVID-19 pandemic, many govern- ments provided financial assistance to households. Using representative consumer surveys conducted during the pandemic in 2020, we examine the effects of this fiscal policy instrument on households in two emerging economies, Vietnam and Thailand. Our paper contributes to the literature by studying consumer sentiment and durable spending responses to government financial support and the underlying transmission channels for these responses. We find that government support improves consumer sentiment and increases the likelihood of durable spending. Possible channels for these effects include more optimistic macroeconomic expectations and higher trust in the government's ability to deal with the pandemic, as well as less concern about the general impact of the crisis. We also find that financial support improves in- dividuals' mental health and life satisfaction. Our results suggest that government financial support not only helps stimulate the economy but also enhances people's well-being more generally.

Keywords: Fiscal policy, Financial support of households, Consumer sentiment, Durables spending, Expectations, Government trust, COVID-19, Thailand, Vietnam

JEL Classification: E62, E71, D12, D83, H31

Suggested Citation

Bui, Dzung and Dräger, Lena and Hayo, Bernd and Nghiem, Giang and Nghiem, Giang, The Effects of Fiscal Policy on Households during the COVID-19 Pandemic: Evidence from Emerging Economies (August 17, 2022). Available at SSRN: https://ssrn.com/abstract=4192738 or http://dx.doi.org/10.2139/ssrn.4192738

Dzung Bui

University of Marburg ( email )

Universitätsstrasse 24
D-35032 Marburg, D-35032
Germany

Lena Dräger

Leibniz University Hannover ( email )

Königsworther Platz 1
Hannover, 30167
Germany

Bernd Hayo (Contact Author)

University of Marburg - School of Business & Economics ( email )

Universitaetsstr. 24
Marburg, D-35032
Germany
++49(0)6421-28-23091 (Phone)
++49(0)6421-28-23193 (Fax)

Giang Nghiem

Leibniz Universität Hannover ( email )

Königsworther Platz 1
Hannover, 30167
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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