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| [5] | Parker, J.A.; Souleles, N.S.; Johnson, D.S.; MacClelland, R. Consumer Spending and the Economic Stimulus Payments of 2008. Available online: https://www.kellogg.northwestern.edu/research/risk/projects/Parker%20PSJM%20Feb%2018%202010.pdf (accessed on 26 October 2013).
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| [10] | Taylor, J.B. The State of the Economy and Principles for Fiscal Stimulus. Available online: http://www.stanford.edu/~johntayl/Onlinepaperscombinedbyyear/2008/The_State_of_the_Economy_and_Principles_for_Fiscal_Stimulus_Senate_Budget_Committee-11-19-08.pdf (accessed on 26 October 2013).
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| [14] | They assumed that households will spend 50% of the tax rebate.
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| [17] | They use weekly data provided by 34,000 participating households that scanned their purchases for ACNielsen’s Homescan.
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| [18] | The Consumer Expenditure Survey is collected by the Bureau of Labor Statistics; it provides information on the buying habits of American consumers.
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| [21] | Vacaflores, D.E. Monetary stimulus: Through Wall Street or Main Street? Rev. Anal. 2012, 14, 9–40.
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| [22] | Greenwood, J.; Hercowitz, Z.; Huffman, G.W. Investment, capacity utilization and the real business cycle. Am. Econ. Rev. 1988, 78, 402–417.
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| [23] | The parameter φ thus allows us to test the differential impact of a monetary injection by modeling a helicopter drop on households or on banks.
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| [24] | Remember that Ben Bernanke actually said that the Fed could inject money into the system as a helicopter drop directly to the consumers if necessary (Bernanke [40]).
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| [25] | When φ = 1 we have that all the monetary injection goes through the financial intermediaries.
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| [26] | Karame, F.; Patureau, L.; Sopraseuth, T. Limited participation and exchange rate dynamics: Does theory meet the data? J. Econ. Dyn. Control 2008, 32, 1041–1087, doi:10.1016/j.jedc.2007.04.007.
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| [27] | Vacaflores, D.E. Technical Appendix (Monetary Transfers in the U.S.: How Efficient Are Tax Rebates?). Available online: http://www.business.txstate.edu/users/dv13/research.htm (accessed on 26 October 2013).
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| [28] | Nakamura, E.; Steinson, J. Fiscal Stimulus in a Monetary Union: Evidence from U.S. Regions. Available online: http://www.columbia.edu/~js3204/papers/fiscal.pdf (accessed on 26 October 2013).
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| [29] | Note that M1 in 2008Q2 was $1399 billion, which at the average growth of money will become $1410 billion by 2008Q3, when tax rebates introduced an initial $78 billion that was followed by another $15 billion in 2008Q3.
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| [30] | This assumption sets the steady-state nominal exchange rate to be constant instead of growing at a constant rate.
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| [31] | Results for a 1% technology shock are standard, but since there are only used to establish the strength of the model they are presented in the Supplementary Materials.
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| [32] | Note that the model assumes instant adjustment in prices, which can be oversimplifying the behavior of prices. Alternatively, one could introduce price rigidities to reduce these volatilities, but the gains are only marginal (see Patureau [33] for a model with these characteristics).
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| [33] | Patureau, L. Pricing-to-market, limited participation and exchange rate dynamics. J. Econ. Dyn. Control 2007, 31, 3281–3320, doi:10.1016/j.jedc.2006.11.005.
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| [34] | Christiano, L.J.; Eichenbaum, M. Some Empirical Evidence on the Liquidity Effect. In Political Economy, Growth and Business Cycle; Cukierman, Z., Hercowitz, Z., Leiderman, L., Eds.; MIT Press: Cambridge, MA, USA, 1992.
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| [35] | Again, this arises from flexibility of prices assumed in the model, but the main results from the alternative distribution of the injection should not depend on the modeling of sticky prices.
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| [36] | Note that we can alternatively interpret this distribution of the injection as the actual use of the funds by the household between consumption and savings, responding to a given marginal propensity to consume.
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| [37] | Krugman, P. Stimulus Arithmetic (Wonkish but Important). Available online: http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/?_r = 0 (accessed on 28 October 2013).
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| [38] | Parker et al. [5] reports that 130 million U.S. tax filers received the 2008 tax rebate (around 85% of eligible tax payers) and Shapiro and Slemrod [13] report that 8.4% of respondents stated that they will not receive the tax rebate. The total adult population is approximately 230 million.
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| [39] | We had to set α, the parameter that determines the share of capital in production, to a higher level (0.46) to generate comparable responses to the results under the main specification.
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| [40] | Bernanke, B.S. Deflation: Making sure “it” doesn’t happen here. Remarks by Governor Ben S Bernanke before the National Economists Club, Washington, DC, USA. 12, November, 2002.
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| [41] | Blanchard, O.; Dell’Ariccia, G.; Mauro, P. Rethinking macroeconomic policy. J. Money Credit Bank. 2010, 42, 199–215, doi:10.1111/j.1538-4616.2010.00334.x.
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