The role of progressivity on the economic impact of fiscal transfers: a HANK for Chile

Abstract

During the Covid-19 pandemic, the Chilean government provided unprecedented economic assistance to households. Direct fiscal transfers through stimulus checks amounted to nine percent of the country’s GDP. Aditionally, three times during the period, policymakers allowed for the possibility of withdrawing up to ten percent of the workers’ individual pension accounts savings. This policy provided households with access to additional resources equivalent to 19 percent of GDP. Overall, the extra liquidity provided amounted to 28 percent of GDP, thus becoming Chile’s most extensive support package in recent history.