Abstract
Background: The stimulus coupon plan is one of the economic relief plans used to boost Taiwan’s slumping economy in the aftermath of the COVID-19 pandemic outbreak. In order to obtain prior information to understand whether or not the stimulus coupon plan would effectively revive the economy in advance, the purpose of this study is to learn lessons from Taiwan’s consumption voucher scheme initiated during the 2007–2009 global financial crisis through evaluating the effect of the consumption voucher scheme on private consumption expenditure. Methods: The smooth time-varying cointegration analysis was applied to estimate the income elasticity of consumption, indicating the individual’s reaction to consumption vouchers in terms of private consumption expenditure, and then the multiple structural change model was estimated to identify endogenous regime changes of the income elasticity of consumption. Results: We found that the income elasticity of consumption dramatically decreased after 2007Q1, a period that covered the subprime mortgage crisis in 2007–2009 and the time of issuance of the consumption vouchers in 2009. Conclusions: We concluded that Taiwan’s consumption voucher scheme might have had either no or little effect on stimulating the economy, so policymakers should be cautioned concerning the potential ineffectiveness of the stimulus coupon plan in the future.
Highlights
The recent COVID-19 pandemic outbreak has put the world into a great lockdown due to the enforcement of necessary quarantines and social distancing practices used to control the spread of the pandemic, and the subsequent massive collapse in economic activities reminisces us that a sharp increase in the unemployment rate and devastating losses in business were incurred during the 2007–2009 global financial crisis period [1]
This stimulus coupon plan was announced to be implemented in July 2020 [3], the Taiwan government has no definite timeline to put this plan into effect due to the ongoing outbreak of the COVID-19 pandemic
We investigated the effect of this scheme by estimating the income elasticity of consumption based on the STVC model [26], and the multiple structural change model [27] to identify whether there exists a structural break of income elasticity of consumption during the study period
Summary
The recent COVID-19 pandemic outbreak has put the world into a great lockdown due to the enforcement of necessary quarantines and social distancing practices used to control the spread of the pandemic, and the subsequent massive collapse in economic activities reminisces us that a sharp increase in the unemployment rate and devastating losses in business were incurred during the 2007–2009 global financial crisis period [1]. The purpose of this study is to learn lessons from Taiwan’s consumption voucher scheme initiated during the 2007–2009 global financial crisis through evaluating the effect of the consumption voucher scheme on private consumption expenditure In this way, we would obtain some prior information to understand whether or not the future stimulus coupon plan would effectively revive the economy in advance. In order to obtain prior information to understand whether or not the stimulus coupon plan would effectively revive the economy in advance, the purpose of this study is to learn lessons from Taiwan’s consumption voucher scheme initiated during the 2007–2009 global financial crisis through evaluating the effect of the consumption voucher scheme on private consumption expenditure. Conclusions: We concluded that Taiwan’s consumption voucher scheme might have had either no or little effect on stimulating the economy, so policymakers should be cautioned concerning the potential ineffectiveness of the stimulus coupon plan in the future.
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