Feasible Stimulus and Constrained Monetary Policy



What sequence of stimulus payments induces the same consumption stimulus as a desired (but potentially infeasible) interest rate cut? This mapping depends exclusively on slopes of an aggregate consumption function, which can be recovered through microeconomic causal variation. We operationalize this strategy by using granular full-population administrative data and combining estimates from spending responses to (i) monetary-policy transmission through mortgage contracts and (ii) windfall gains from (unanticipated) cash inheritances. Matching the aggregate consumption response stemming from a 1 percentage point decrease in the monetary-policy rate requires stimulus payments of around $900 per person paid over 5 years. While macro-equivalent, the policies differ materially in their cross sectional incidence: interest rate policy stimulates spending through wealthy mortgage owners, while the direct stimulus effects of checks are more concentrated at the bottom of the income distribution.