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Working Paper
Ten Days Late and Billions of Dollars Short: The Employment Effects of Delays in Paycheck Protection Program Financing
Doniger, Cynthia L.; Kay, Benjamin S. (2021-01-15)
Delay in the provision of Paycheck Protection Program (PPP) loans due to insufficient initial funding under the CARES Act substantially and persistently reduced employment. Delayed loans increased job losses in May and persistently reduced recalls throughout the summer. The magnitude and heterogeneity of effects suggest significant barriers to obtaining external financing, particularly among small firms. Effects are inequitably distributed: larger among the self-employed, less well paid, less well educated and--importantly for the design of future programs--in very small firms. Our estimates ...
Finance and Economics Discussion Series , Paper 2021-003

Journal Article
The COVID-19 Fiscal Multiplier: Lessons from the Great Recession
Wilson, Daniel J. (2020-05-26)
The United States enacted a series of fiscal relief and stimulus bills in recent weeks, centered around the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The current fiscal response shares key similarities to the fiscal stimulus enacted during the Great Recession. Research over the past 10 years on the macroeconomic impact of that stimulus thus has important implications for the current fiscal response. The results point to a large potential impact on GDP.
FRBSF Economic Letter , Volume 2020 , Issue 13 , Pages 5

How Should the Government Spend the Fiscal Budget during the COVID-19 Pandemic?
Mercan, Yusuf; Birinci, Serdar; See, Kurt; Karahan, Fatih (2020-08-20)
A mix of expanded unemployment insurance benefits and payroll subsidies to employers may be more effective in speeding up the recovery than implementing just one of those policies.
On the Economy

Working Paper
Household Liquidity and Macroeconomic Stabilization: Evidence from Mortgage Forbearance
Lee, Sean Chanwook; Maghzian, Omeed (2023-09-10)
We estimate the impact of household liquidity provision on macroeconomic stabilization using the 2020 CARES Act mortgage forbearance program. We leverage intermediation frictions in forbearance induced by mortgage servicers to identify the effect of reducing short-term payments with little change in long-term debt obligations on local labor market outcomes. Following statewide business reopenings, a 1 percentage point increase in the share of mortgages in forbearance leads to a 30 basis point increase in monthly employment growth in nontradable industries. In a model incorporating ...
Working Papers , Paper 23-12

Discussion Paper
Where Have the Paycheck Protection Loans Gone So Far?
Liu, Haoyang; Volker, Desi (2020-05-06)
The Paycheck Protection Program (PPP) is a central piece of the CARES Act. In the program’s first round, $349 billion in forgivable government-guaranteed loans were extended to small businesses to cover costs related to payroll and utilities, as well as mortgage and rent payments. The program opened for applications on April 3 and was oversubscribed by April 16. Because of its popularity, lawmakers passed a new bill replenishing the fund with another $310 billion and the Small Business Administration (SBA) started approving loans again on April 27. With a new round of PPP lending underway, ...
Liberty Street Economics , Paper 20200506

Working Paper
Consumption Heterogeneity by Occupation: Understanding the Impact of Occupation on Personal Consumption during the COVID-19 Pandemic
Cotton, Christopher D.; Garga, Vaishali; Rohan, Justin (2020-12-01)
This paper exploits the variation in the unemployment rate of different occupations in the first part of the COVID-19 pandemic to analyze the response of consumption spending to unemployment risk. We find that earlier in the pandemic, higher unemployment risk did not reduce relative spending. However, as the pandemic proceeded, higher unemployment risk reduced relative spending. This pattern held across both essential and nonessential spending categories. We find that “high-risk” occupations had three common characteristics: lower ability to be performed from home, higher physical ...
Working Papers , Paper 20-16

Report
COVID Response: The Paycheck Protection Program Liquidity Facility
Volker, Desi (2021-09-01)
To bolster the effectiveness of the Small Business Administration’s Paycheck Protection Program (PPP), the Federal Reserve, with the backing of the Secretary of the Treasury, established the Paycheck Protection Program Liquidity Facility (PPPLF). The facility was intended to supply liquidity to financial institutions participating in the PPP and thereby provide relief to small businesses and help them maintain payroll. In this article, we lay out the background and rationale for the creation of the facility, cover the salient features of the PPP and the PPPLF, and analyze the facility’s ...
Staff Reports , Paper 978

Working Paper
Redistribution and the Monetary–Fiscal Policy Mix
Yang, Choongryul; Bhattarai, Saroj; Lee, Jae Won (2021-03-01)
We show that the effectiveness of redistribution policy in stimulating the economy and improving welfare is directly tied to how much inflation it generates, which in turn hinges on monetary-fiscal adjustments that ultimately finance the transfers. We compare two distinct types of monetary-fiscal adjustments: In the monetary regime, the government eventually raises taxes to finance transfers, while in the fiscal regime, inflation rises, effectively imposing inflation taxes on public debt holders. We show analytically in a simple model how the fiscal regime generates larger and more persistent ...
Finance and Economics Discussion Series , Paper 2021-013

Discussion Paper
Debt Relief and the CARES Act: Which Borrowers Face the Most Financial Strain?
Chakrabarti, Rajashri; Haughwout, Andrew F.; Lee, Donghoon; Nober, William; Scally, Joelle; Van der Klaauw, Wilbert (2020-08-19)
In yesterday's post, we studied the expected debt relief from the CARES Act on mortgagors and student debt borrowers. We now turn our attention to the 63 percent of American borrowers who do not have a mortgage or student loan. These borrowers will not directly benefit from the loan forbearance provisions of the CARES Act, although they may be able to receive some types of leniency that many lenders have voluntarily provided. We ask who these borrowers are, by age, geography, race and income, and how does their financial health compare with other borrowers.
Liberty Street Economics , Paper 20200819

Report
Intermediation Frictions in Debt Relief: Evidence from CARES Act Forbearance
Kim, You Suk; Lee, Donghoon; Scharlemann, Tess C.; Vickery, James (2022-10-01)
We study how intermediaries—mortgage servicers—shaped the implementation of mortgage forbearance during the COVID-19 pandemic and use servicer-level variation to trace out the causal effect of forbearance on borrowers. Forbearance provision varied widely across servicers. Small servicers and nonbanks, especially nonbanks with small liquidity buffers, facilitated fewer forbearances and saw a higher incidence of forbearance-related complaints. Easier access to forbearance substantially increased mortgage nonpayment but also reduced delinquencies outside of forbearance. Part of the liquidity ...
Staff Reports , Paper 1035

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