Fiscal Policy: Financing and Indebtedness

Last registered on April 30, 2025
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Pre-Trial

Trial Information

General Information

Title
Fiscal Policy: Financing and Indebtedness
RCT ID
AEARCTR-0015431
Initial registration date
April 30, 2025

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
April 30, 2025, 1:51 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Germany
Region
Country
Spain
Region
Country
France
Region
Country
Italy
Region
Country
Netherlands
Region

Primary Investigator

Name
Shihan Xie
Affiliation
University of Illinois at Urbana-Champaign
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Cynthia Wu
PI Affiliation
University of Illinois Urbana-Champaign
PI Name
Ji Zhang
PI Affiliation
Tsinghua University
PI Name
Yinxi Xie
PI Affiliation
Indiana University, Bloomington

Additional Trial Information

Status
Completed
Start date
2024-11-01
End date
2025-02-28
Keywords
Other
Additional Keywords
fiscal policy, debt-to-GDP, household expectations
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
We study the effectiveness of government spending shocks across several countries with different debt-to-GDP ratios. We illustrate that tax-financed and debt-financed spending have different stimulative effects depending on the level of existing government debt.
External Link(s)

Registration Citation

Citation
Wu, Cynthia et al. 2025. "Fiscal Policy: Financing and Indebtedness." AEA RCT Registry. April 30. https://doi.org/10.1257/rct.15431-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Intervention (Hidden)
All participants, including the control group, received factual information about their country's average debt‐to‐GDP ratio over the past decade at the beginning of the information treatment stage.

Respondents in treatment groups were asked to consider a hypothetical scenario involving an increase in government spending over the next 12 months. Participants in the first treatment group consider a scenario that government spending increase will be entirely financed by debt. Participants in the second treatment group consider a scenario that the increase was covered through higher taxes.
Intervention Start Date
2024-11-01
Intervention End Date
2025-02-28

Primary Outcomes

Primary Outcomes (end points)
economic outlooks, including GDP growth expectations, inflation expectations, consumption expectations
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The survey includes four main sections: pre-treatment beliefs, information treatment, post-treatment beliefs, and background information.

First, we ask about baseline household characteristics, such as average monthly spending. We then proceed to ask about expectations for future household spending, inflation, and GDP growth rates in their country at both 1-year and 5-year horizons. These questions provide a snapshot of participants' economic outlook before any additional information is introduced. An attention-check question was embedded before moving on to the next section.

We then present factual information on fiscal policy, specifically, the average debt-to-GDP ratio in their country over the past decade. Next, participants are randomly assigned to either a control or treatment group. Depending on the treatment group, they are presented with a hypothetical scenario in which a government spending increase is financed either through increased borrowing or tax hikes. The control group does not receive any additional information.

After receiving the fiscal information, participants are asked again about their expectations regarding inflation, GDP growth, interest rates, and personal spending. Finally, respondents provided demographic information, including household income, savings, home ownership, education, and gender.
Experimental Design Details
Randomization Method
randomization done in office by a computer
Randomization Unit
individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
not applicable
Sample size: planned number of observations
9000 individuals
Sample size (or number of clusters) by treatment arms
3000 individuals
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials