Household spending responses to two-time COVID-19 payments

During the COVID-19 pandemic, the Japanese government provided special cash payments (SCPs) multiple times. This study aims to estimate the marginal propensity to spend, a proxy for the marginal propensity to consume (MPC), to these income shocks using detailed bank transaction data. Our findings indicate that the MPC is stable at around 0.2 for both the first wave of SCPs launched in mid-2020 and the second wave of SCPs provided from the end of 2021 to the beginning of 2022. The MPC tends to increase as individuals become less wealthy, more liquidity constrained, or the number of family members is larger. • MPC to special cash payments (SCPs) during the COVID-19 is estimated. • We use bank transaction data from one of the three largest banks in Japan. • MPC is stable at around 0.2 for both the first and second waves of SCPs. • MPC increases as individuals become less wealthy and more liquidity constrained. • MPC increases as the number of family members is larger.