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Quantifying the Inflationary Impact of Fiscal Stimulus under Supply Constraints

Author

Listed:
  • Julian di Giovanni
  • Şebnem Kalemli-Özcan
  • Alvaro Silva
  • Muhammed A. Yıldırım

Abstract

This paper builds on Baqaee and Farhi (2022) and di Giovanni et al. (2022) to quantify the contribution of fiscal policy on US inflation over the December 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.

Suggested Citation

  • Julian di Giovanni & Şebnem Kalemli-Özcan & Alvaro Silva & Muhammed A. Yıldırım, 2023. "Quantifying the Inflationary Impact of Fiscal Stimulus under Supply Constraints," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 76-80, May.
    • Handle: RePEc:aea:apandp:v:113:y:2023:p:76-80
    DOI: 10.1257/pandp.20231028
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    References listed on IDEAS

    as
    1. David Baqaee & Emmanuel Farhi, 2022. "Supply and Demand in Disaggregated Keynesian Economies with an Application to the COVID-19 Crisis," American Economic Review, American Economic Association, vol. 112(5), pages 1397-1436, May.
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    Citations

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    Cited by:

    1. Willem Thorbecke, 2025. "The Impact of Inflation on the U.S. Stock Market After the COVID-19 Pandemic," IJFS, MDPI, vol. 13(1), pages 1-20, January.
    2. Ascari, Guido & Bonam, Dennis & Smadu, Andra, 2024. "Global supply chain pressures, inflation, and implications for monetary policy," Journal of International Money and Finance, Elsevier, vol. 142(C).
    3. Diego A. Comin & Robert C. Johnson & Callum J. Jones, 2023. "Supply Chain Constraints and Inflation," NBER Working Papers 31179, National Bureau of Economic Research, Inc.
    4. Alvaro Silva, 2024. "Inflation in Disaggregated Small Open Economies," Working Papers 24-12, Federal Reserve Bank of Boston.
    5. Wifo, 2023. "WIFO-Monatsberichte, Heft 4/2023," WIFO Monatsberichte (monthly reports), WIFO, vol. 96(4), April.
    6. Aspachs, Oriol & Graziano, Alberto & Mestres, Josep & Montalvo, Jose G. & Reynal-Querol, Marta, 2024. "Spending response to cash transfers to shield households from inflation: Evidence from bank accounts," Economics Letters, Elsevier, vol. 238(C).
    7. Philippe Goulet Coulombe & Karin Klieber & Christophe Barrette & Maximilian Goebel, 2024. "Maximally Forward-Looking Core Inflation," Papers 2404.05209, arXiv.org.
    8. Thomas Url, 2023. "Hohe Inflation führt zu Kurswechsel in der Geldpolitik," WIFO Monatsberichte (monthly reports), WIFO, vol. 96(4), pages 269-281, April.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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