Does Unconventional Monetary and Fiscal Policy Contribute to the COVID Inflation Surge in the US?

Jing Cynthia Wu, Yinxi Xie () and Ji Zhang

Staff Working Papers from Bank of Canada

Abstract: We assess whether unconventional monetary and fiscal policy implemented in response to the COVID-19 pandemic in the U.S. contribute to the 2021-2023 inflation surge through the lens of several different empirical methodologies—event studies, vector autoregressions, and regional panel regressions using granular data—and establish a null result. The key economic mechanism works through a disinflationary channel in the Phillips curve while monetary and fiscal stimuli put positive pressure on inflation through the usual demand channel. We illustrate this negative supply-side channel both theoretically and empirically.

Keywords: Inflation and prices; Monetary policy; Fiscal policy; Business fluctuations and cycles; Central bank research (search for similar items in EconPapers)
JEL-codes: E31 E52 E63 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2024-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:24-38

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