How Much Did COVID Stimulus Checks Spur Inflation?
A study of pandemic-era car sales offers an answer.
- By
- June 29, 2026
- CBR - Fiscal Policy
US federal spending during the COVID-19 pandemic was enormous even by Uncle Sam’s standards. With the economy and job market in a free fall, and the severity of the health crisis uncertain, policymakers doled out nearly $5 trillion beginning in early 2020 to support households, businesses, and local governments. As prices began rising in the following months, some observers said the stimulus had served mainly to fuel inflation.
However, research by Duke’s David Berger, the US Treasury’s Geoffrey Gee, the Federal Reserve’s Nick Turner, and Chicago Booth’s Eric Zwick challenges that view. Focused on the auto market, it indicates that stimulus programs were responsible for less than one-fifth of the price increases that occurred during this time. Instead, the bulk of the inflation resulted from supply shortages, monetary easing, and changing consumer preferences.
The onset of COVID set off a sudden drop in economic activity. Among the countermeasures US policymakers employed was an historic level of fiscal support that included $1.8 trillion in payments to households, including three rounds of economic impact payments, commonly known as stimulus checks. The separate Advance Child Tax Credit provided nearly $900 billion in largely unconditional direct transfers to individuals. All told, these programs provided many households with $10,000 or more in financial assistance.
To gauge the programs’ effect on household spending and prices, the researchers focused on the economically vital market for vehicles. Because consumers’ marginal propensity to consume is heavily driven by spending on cars, the market provides a window into how stimulus payments influence consumption and inflation dynamics. As a result, it offers insight into whether fiscal policy can boost demand without setting off excessive price hikes, even in constrained environments.
Bigger transfers, more car sales
The research finds that auto sales rebounded more strongly in zip codes where households received more fiscal support (from stimulus-check and Child Tax Credit payments) than in zip codes where they received smaller transfers.
The researchers analyzed automobile registration data, which list vehicle registration addresses and purchase locations. They supplemented these with restricted-access credit report data that provide borrower details—such as age and credit score—and track loan payments over time.
Since the eligibility formula for the COVID payments was similar to that used for the Child Tax Credit, the researchers took the per-return value of the CTC in 2018 to measure an area’s exposure to the stimulus. All else equal, a zip code where residents had higher average CTC benefits should have received higher average payments, which the study confirms.
Reviewing auto sales in the months after checks were mailed out, the researchers drew on an assumption used in previous studies that regions with low exposure to stimulus payments are valid proxies for what would have happened in high-exposure regions, in this instance, if they had not received pandemic-era transfers.
The results of the analysis suggest that fiscal transfers boosted auto sales by 3 percent annually over 2019 levels, increasing auto purchases by more than 5 million new and used vehicles between 2020 and 2022. But the stimulus payments were responsible for less than 20 percent of the increases in auto prices, according to the study.
Notably, while the transfers increased demand for new cars, trade-ins expanded older-vehicle inventories, offsetting price pressure in the used-car market. The researchers calculate that the payments raised household income by about 8 percent over two years—and that this theoretically should have raised the average car price by 1–2.5 percent. But the data indicate that prices went up 25 percent, which the researchers consider evidence that other shocks were at play, including lower interest rates, easier access to credit, flush savings accounts (whose growth was unrelated to stimulus payments), and a temporary shift in buying preferences. At a time when people couldn’t easily eat out or enjoy other services, they spent more of their money on tangible goods instead.
But inflation can be affected if stimulus is targeted, the researchers explain. They note that poorer households were more inclined than richer ones to spend their money on cars, as the latter tended to park any extra stimulus money in savings. Supply is also an important factor; if cars had been harder to get, inflation would have likely been higher. “More broadly, inflation from stimulus depends on supply constraints, market structure, and targeting—not just on the size of the transfers,” the researchers write.
They caution that while the COVID stimulus boosted economic activity, “if transfers primarily fuel inflation rather than consumption growth, they effectively shift from being stimulative to being redistributive.”
David Berger, Geoffrey Gee, Nick Turner, and Eric Zwick, “Stimulating Auto Markets,” Working paper, March 2026.
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