On The Mental Accounting Of Fiscal Stimulus Spendings: Unravelling Cognitive And Emotional Drivers

By Joey Pek-U SOU and Fung KWAN
Published in The Singapore Economic Review

Abstract:

The consumer psychology behind mental accounting (MA) plays a crucial role in shaping the effectiveness of fiscal stimulus policies, as it influences how individuals perceive, allocate and spend financial resources. This study employs structural equation modeling to analyze survey data from a sample of 952 respondents, exploring how cognitive dimensions (income labeling and mental budgeting) and affective dimensions (pleasure gained and pain buffered) influence spending intentions under two stimulus payment policies in Macao, China: the electronic consumption voucher (ECV) and the cash handout (Wealth Partaking Scheme). The findings challenge the traditionally cognition-driven MA theory, highlighting that emotion plays a significant role in shaping spending intentions under fiscal stimulus policies. Practically, by comparing policies of digital and traditional platforms, this study offers insights to improve fiscal policy design and address the needs of diverse target groups.