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Inflation Dynamics and Quantitative Easing

Tarron Khemraj and Sherry Yu

Eastern Economic Journal, 2023, vol. 49, issue 4, No 6, 613-638

Abstract: Abstract The paper studies the quantitative easing (QE)-inflation nexus, as well as other inflationary factors such as supply, demand, oil and fiscal shocks. Findings are: (i) QE can be seen as a complementary policy instrument for short-term stabilization; (ii) the interest rate instrument still produces paradoxical effects on inflation and output for short horizons in the post-2007 period; (iii) fiscal, supply and demand shocks exert the highest percentage effects on inflation in the post-2019 period, but QE and interest rate interventions also account for a sizable variation; and (iv) inflation takes a long time to converge or transition after a shock.

Keywords: Quantitative easing; Inflation; COVID-19; Fiscal deficit; Gibson’s paradox (search for similar items in EconPapers)
JEL-codes: E30 E40 E50 E58 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41302-023-00257-y

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