The Macroeconomic Effect of Stimulus Checks: Evidence from Postwar Veterans’ Payments
Do stimulus checks—one-off, deficit-financed lump-sum payments to households—boost the economy? We study a natural experiment: payments to U.S. veterans after World War II that mimic stimulus checks but were plausibly exogenous to the economy. These payments led to a temporary increase in transfers and a persistent, hump-shaped increase in consumption. The transfer multiplier—the cumulative response of consumption to transfers—reaches 1 after six months and exceeds 2 after a year. The standard heterogeneous-agent New Keynesian model cannot match the hump-shaped consumption response. A version with imperfect expectations—with households underreacting on impact but overreacting at longer horizons—can match our estimates.
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Copy CitationJoao Guerreiro, Jonathon Hazell, Diego R. Känzig, and Ed Manuel, "The Macroeconomic Effect of Stimulus Checks: Evidence from Postwar Veterans’ Payments," NBER Working Paper 35786 (2026), https://doi.org/10.3386/w35786.Download Citation
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