Emergency Loans and Consumption – Evidence from COVID-19 in Iran

We use monthly and daily transaction data from Iran, disaggregated by provinces, good and service categories, and retail store segments to gauge the impact of government emergency loans on consumption patterns. We find that emergency loans are positively related with higher consumption of non-durable and semi-durable goods, suggesting that the emergency loans were predominantly used for their intended purpose. The effects were strongest in the first few days and then dissipated over time. We find effects only for in-store but not online transactions and in poorer rather than richer provinces, suggesting that it is the poorer who reacted more strongly with higher consumption to the emergency loans.