Fiscal policy boosts consumption in recessions but displaces it in mixed states.
The study looked at how government spending affects people's spending habits during different economic conditions. They found that when households are struggling financially, increasing government spending can boost consumer spending during recessions. However, when households are not facing financial constraints, the impact of government spending on consumer spending is minimal. Additionally, if both a recession and financial stress occur at the same time, government spending can have a negative impact on consumer spending.