Government-sponsored shopping coupons in Taiwan

An interesting government action is being discussed in Taiwan. Instead of handing out regular money that may most likely be saved and not spent, the government would be issuing time limited coupons that would be only used for buying consumables.

I think it makes a lot of sense. It goes along the line of separating our currency between an investment currency whose goal is to keep its value over time, and a medium of exchange currency whose goal is to flow as fast as possible b/c of its well-known expiration time.

In case of very bad recession, this is no unlikely to happen in western economies, as they fail to boost internal demand by pumping legal tender into banks who are refusing to lend. It may make particular sense if the products/services that can be bought with these coupons are scarce (ex. oil in the U.S.).

From AFP (hat tip reader Razzz):

Everyone in Taiwan will be given more than 100 US dollars in shopping vouchers in a government bid to boost the economy amid the global credit crisis, the prime minister announced Tuesday.

Under the scheme, the island’s 23 million people regardless of age or wealth will be given 3,600 Taiwan dollars (109 US)…those people who donated their coupons would be able to file for tax deductions.

It is expected to be implemented as early as January in time for the Lunar New Year holidays which will begin on January 26.
“The programme is aimed at boosting the economy … and is expected to contribute to a 0.64 percent increase in 2009 GDP,” Liu said.

Taiwan’s gross domestic product growth is projected at 5.08 percent for 2009 according to government figures, after an estimated 4.30 percent for 2008.

However, analysts and businessmen were more sceptical.

“I can’t see that the programme will have much impact on the GDP. If people can’t make their ends meet, they won’t be encouraged to spend more just by getting the vouchers,” said Johnny Lee, an analyst at President Securities…

The vouchers, which will expire in December 2009, can be used at registered retail stores, supermarkets and restaurants, officials said.

The scheme, proposed by the island’s top economics planning body, the Council for Economic Planning and Development, is based on a similar initiative launched by Japan in 1999…

October exports, the engine of the economy, fell 8.3 percent from a year earlier, largely on falling demand for electronic and precision products amid the global economic slump.

The figures, together with an updated IMF forecast, prompted Taiwan’s central bank to further lower interest rates by 25 basis points last week — the fourth cut in just over a month.

The International Monetary Fund earlier this month predicted that advanced economies — major export markets of Taiwan — would shrink next year under pressure from the global credit squeeze, forcing a new round of European interest rate cuts.

The government lowered its economic growth forecast for 2008 to 4.30 percent from 4.78 percent, but an increasing number of economists and analysts regard the revision as too optimistic given the current economic turmoil.