Working Paper: CEPR ID: DP17828
Authors: Julian Di Giovanni; Sebnem Kalemli-Ozcan; Alvaro Silva; Muhammed Yildirim
Abstract: This paper builds on Baqaee and Farhi (2022) and di Giovanni et al. (2022) to quantify the contribution of fiscal policy on U.S. inflation over the Dec-2019 to June-2022 period. Model calibrations show that aggregate demand shocks explain roughly two-thirds of total model-based inflation, and that the fiscal stimulus contributed half or more of the total aggregate demand effect.
Keywords: Fiscal Policy; Supply Constraints
JEL Codes: E23; E31; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| aggregate demand shocks (E00) | total model-based inflation (E31) |
| fiscal stimulus (E62) | aggregate demand shocks (E00) |
| government expenditures excluded from nominal GDP (H59) | contribution of aggregate demand shocks to inflation (E31) |