Finance and Economics Discussion Series (FEDS)
March 2024
In the Driver's Seat: Pandemic Fiscal Stimulus and Light Vehicles
Jack Dunbar, Christopher Kurz, Geng Li, and Maria D. Tito
Abstract:
This paper explores the impact of two fiscal programs, the Economic Impact Payments and the Paycheck Protection Program, on vehicle purchases and relates our findings to post-pandemic price pressures. We find that receiving a stimulus check increased the probability of purchasing new vehicles. In addition, the disbursement of funds from the Paycheck Protection Program was associated with a rise in local new car registrations. Our estimates indicate that these two programs account for a boost of 1 3/4 million units—or 12 percent—to new car sales in 2020. Furthermore, the induced boost in sales coincided with the presence of significant production constraints and exacerbated an inventory drawdown, thereby contributing to the rapid increase in new vehicle prices that prevailed in the subsequent years.
Keywords: Discretionary Fiscal Policy, Light Vehicle Purchases, Inflation
DOI: https://doi.org/10.17016/FEDS.2024.013
PDF: Full Paper
Related Materials: Accessible materials (.zip)
Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.