Support Policies and Inflationary Pressures: A Critical Review of 2020-2022 in the Light of the 2008 Experience

Ioannis Georgakas

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the relationship between expansionary monetary and fiscal policy and inflation in two different periods: the 2008 global financial crisis and the COVID-19 pandemic period from 2020 to 2022. In the first case, we analyze the response of central banks through interest rate cuts and quantitative easing in an environment of negative inflation and low demand. In the second, the much more intense monetary and fiscal intervention is examined, accompanied by direct transfers to households and firms, leading to widespread inflationary pressures from 2021 onwards. We attempt to compare the features and effects of the two policies, highlighting the effects of excessive liquidity, deficit financing, and delayed tightening. We conclude that treating inflation as a "transitory phenomenon" was a critical miscalculation. The need for macroeconomic stability, timely interest rate adjustment, and restoration of monetary credibility is stressed

Keywords: monetary policy; inflation; Federal Reserve; European Central Bank; interest rates; quantitative easing; 2008 crisis; COVID-19 pandemic; monetary policy; inflation (search for similar items in EconPapers)
JEL-codes: E31 E52 E62 (search for similar items in EconPapers)
Date: 2025-04-08
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
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