Household Coping and Response to Government Stimulus in an Economic Crisis : Evidence from Thailand

The crash of global financial markets in 2008 caused a ripple effect on economic demand and growth worldwide. Export-oriented economies were hit particularly hard, and many governments stepped in quickly with broad-ranging stimulus programs to lessen the effects on households of rising unemployment and falling income. To better understand the role that stimulus policy might play in softening the effects of these shocks, this paper examines recent nationally-representative data from Thailand, an export-dependent economy where a large-scale stimulus program was introduced in 2009. Using monthly data spanning 2006-2010, the paper uses sub-province-level community panel data to examine the effects of major components of the stimulus on household consumption, income, borrowing, and debt repaid. To address simultaneity of changes in government spending and household outcomes, the analysis estimates a dynamic panel regression, instrumenting the stimulus effect with second-order lagged outcome variables, and estimating the model using the Generalized Method of Moments. The results suggest that household participation in these programs helped smooth consumption. This increase in monthly consumption was not supported from household receipts from the government stimulus, but more likely through a reallocation of consumption and savings that included greater debt repayment. The paper typically finds stronger effects in urban compared with rural areas.

Bibliographic Details

Main Authors:	Haughton, Jonathan, Khandker, Shahidur R., Jitsuchon, Somchai, Koolwal, Gayatri B.
Language:	English en_US
Published:	World Bank, Washington, DC 2012-03
Subjects:	AGRICULTURE, ALLOCATION, ALLOWANCES, ALTERNATIVE ENERGY, BALANCE SHEET, BANK LENDING, BENEFICIARY, BOND, BORROWING COSTS, CHECKS, CHRONIC ILLNESS, CLIMATE, COMMERCIAL BANKS, COMMODITIES, COMMODITY, COMMODITY PRICES, CONSUMER PRICE, CONSUMER PRICE INDEX, CONSUMER SPENDING, CONSUMERS, CONSUMPTION EXPENDITURE, CONSUMPTION EXPENDITURES, CONSUMPTION INSURANCE, CONSUMPTION SMOOTHING, CONSUMPTION VOLATILITY, COUNTERFACTUAL, CREDIT GUARANTEES, CURRENCY, CURRENCY DEVALUATION, DATA AVAILABILITY, DEBT, DEBT REPAYMENT, DEBTS, DEMOGRAPHIC, DEVALUATION, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISTRIBUTIONAL IMPACTS, DOMESTIC PRICES, ECONOMETRICS, ECONOMIC CONDITIONS, ECONOMIC CRISIS, ECONOMIC DEMAND, ECONOMIC DOWNTURN, ECONOMIC HISTORY, ECONOMIC SECTORS, ECONOMIC SHOCKS, ECONOMIC SURVEYS, ENDOGENOUS VARIABLES, ENERGY-INTENSIVE GOODS, EXCHANGE RATE, EXCHANGE RATES, EXPENDITURE, EXPORT MARKET, EXPORT SECTOR, EXPORTS, EXPOSURE, FARM HOUSEHOLDS, FINANCIAL CRISIS, FINANCIAL INSTITUTIONS, FINANCIAL SECTOR, FINANCIAL SYSTEM, FISCAL POLICY, FLOW OF CREDIT, FOOD PRICES, FUEL PRICES, GDP, GLOBAL FINANCIAL MARKETS, GLOBAL MARKETS, GOVERNMENT DEFICITS, GOVERNMENT FUNDS, GOVERNMENT INTERVENTIONS, GOVERNMENT POLICIES, GOVERNMENT POLICY, GOVERNMENT SPENDING, GOVERNMENT SUBSIDIES, GOVERNMENT SUPPORT, HEALTH PROGRAMS, HOUSEHOLD CONSUMPTION, HOUSEHOLD HEAD, HOUSEHOLD INCOME, HOUSEHOLD PARTICIPATION, HOUSEHOLD WELFARE, IDIOSYNCRATIC SHOCKS, IMPORTS, INCOME, INCOME FLUCTUATIONS, INCOME SHOCKS, INCOME TAX, INCOME VARIABILITY, INCOME VOLATILITY, INCREASE IN CONSUMPTION, INFLATION, INFLATIONARY PRESSURES, INSTRUMENT, INSURANCE, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, JOB CREATION, JOBS, LABOR MARKETS, LABOR SUPPLY, LOAN, LOAN REPAYMENT, LOAN REPAYMENT RATE, LOCAL ECONOMY, LOW-INCOME COUNTRIES, MARKET CONDITIONS, MICROCREDIT, MIDDLE-INCOME COUNTRIES, MONETARY ECONOMICS, MONETARY POLICY, MONETARY TERMS, MULTIPLIER EFFECTS, NATIONAL ACCOUNTS, NET EXPORTS, OIL PRICE, OIL PRICES, OPEN ECONOMY, OUTSTANDING LOANS, PENSION, PER CAPITA CONSUMPTION, PER CAPITA INCOME, POLICY RESPONSE, POLICY RESPONSES, POLITICAL ECONOMY, POLITICAL UNCERTAINTY, POOR, POOR COUNTRIES, POOR FARMERS, POOR HOUSEHOLDS, POVERTY LINE, PRICE FLUCTUATIONS, PUBLIC DEBT, PUBLIC ECONOMICS, REAL EXCHANGE RATE, RURAL, RURAL AREAS, RURAL DEVELOPMENT, RURAL HEALTH, RURAL HOUSEHOLDS, RURAL PARTICIPATION, RURAL POOR, SAFETY NET, SAFETY NET MEASURES, SAFETY NET PROGRAMS, SAVINGS, SMALL ENTERPRISES, SMOOTHING CONSUMPTION, SOCIAL ASSISTANCE, SOCIAL SECURITY, STATE ENTERPRISE, TARGETING, TAX, TAX BENEFITS, TAX RATE, TRADE FINANCE, TRANSFER PROGRAMS, UNEMPLOYMENT, UNEMPLOYMENT RATE, UNEMPLOYMENT RATES, VILLAGE FUND, VOLATILITY,
Online Access:	http://documents.worldbank.org/curated/en/2012/03/15981093/household-coping-response-government-stimulus-economic-crisis-evidence-thailand https://hdl.handle.net/10986/19865
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