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Did the Consumption Voucher Scheme Stimulate the Economy? Evidence from Smooth Time-Varying Cointegration Analysis

Author

Listed:
  • Feng-Li Lin

    (Department of Accounting, Chaoyang University of Technology, Taichung 41349, Taiwan)

  • Wen-Yi Chen

    (Department of Senior Citizen Service Management, National Taichung University of Science and Technology, Taichung 40343, Taiwan)

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.

Suggested Citation

  • Feng-Li Lin & Wen-Yi Chen, 2020. "Did the Consumption Voucher Scheme Stimulate the Economy? Evidence from Smooth Time-Varying Cointegration Analysis," Sustainability, MDPI, vol. 12(12), pages 1-16, June.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:12:p:4895-:d:371983
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    References listed on IDEAS

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