Working Paper: NBER ID: w30892
Authors: Julian Di Giovanni; Ebnem Kalemlizcan; Alvaro Silva; Muhammed A. 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; Inflation; COVID-19; Aggregate Demand; Supply Constraints
JEL Codes: E00; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| aggregate demand shocks (E00) | inflation (E31) |
| fiscal stimulus (E62) | aggregate demand shocks (E00) |
| fiscal stimulus (E62) | inflation (E31) |
| without fiscal stimulus (E62) | inflation (E31) |
| hand-to-mouth consumers (D12) | inflation (E31) |