Working Paper: NBER ID: w30906
Authors: Galina Hale; John C. Leer; Fernanda Nechio
Abstract: Fiscal support measures in response to the COVID-19 pandemic varied in their targeted beneficiaries. Relying on variability across 10 large economies, we study differences in the inflationary effects of fiscal support measures targeting consumers or businesses. Because conventional measures of real activity were distorted, we control for the underlying state of the real economy using households sentiment data. We find that fiscal support measures to consumers, but not firms, had inflationary effects that manifested 5 weeks following the announcement and peaked at 12 weeks. The magnitude of the effect was larger in an environment of improving consumer sentiment.
Keywords: Fiscal Support; Inflation; COVID-19; Consumer Sentiment
JEL Codes: E31; E62; E65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fiscal support measures targeting consumers (H31) | Inflation rates (E31) |
| Fiscal support measures targeting consumers (during improving consumer sentiment) (D12) | Inflation rates (E31) |
| Consumer sentiment (D12) | Inflation rates (E31) |
| Fiscal support measures targeting consumers (H31) | Inflation rates (5 weeks after announcement) (E31) |
| Fiscal support measures targeting consumers (H31) | Inflation rates (peaking at 12 weeks) (E31) |
| Fiscal support measures targeting consumers (vs. businesses) (H31) | Inflation rates (E31) |