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Factors of global inflation in 2021–2022

Author

Listed:
  • Eugene L. Goryunov

    (HSE University, Moscow, Russia
    Gaidar Institute for Economic Policy, Moscow, Russia
    Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

  • Sergey M. Drobyshevsky

    (Gaidar Institute for Economic Policy, Moscow, Russia
    Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

  • Alexey L. Kudrin

    (New Economic School, Moscow, Russia
    Gaidar Institute for Economic Policy, Moscow, Russia)

  • Pavel V. Trunin

    (Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia
    Gaidar Institute for Economic Policy, Moscow, Russia)

Abstract

The paper examines the factors of global inflation acceleration in 2021–2022. We consider primarily the developed economies, where rates of inflation over the last two years have exceeded multi-year highs and have significantly exceeded target levels. We find that the cause of accelerating inflation was an imbalance between aggregate demand, which started to increase rapidly in the second half of 2020 as economies began to adapt to the circumstances of the pandemic, and aggregate supply, which encountered persistent constraints associated with interruptions in global supply chains. Significant support for demand was provided by fiscal stimulus that was unprecedented in scale and was accompanied by policy interest rates reaching extremely low levels, and by active injections of liquidity by central banks. The willingness of governments to implement ultra-expansionary monetary and fiscal policies can to a considerable degree be attributed to the fact that during the previous decade large budget deficits, zero interest rates, and programs of quantitative easing had not resulted in macroeconomic destabilization. We examine the view of many central banks that the inflationary wave would not be long-lasting, which was a crucial reason for delaying the interest rates increase. We consider the conditions in which the leading economies might fall into the stagflation trap.

Suggested Citation

  • Eugene L. Goryunov & Sergey M. Drobyshevsky & Alexey L. Kudrin & Pavel V. Trunin, 2023. "Factors of global inflation in 2021–2022," Russian Journal of Economics, ARPHA Platform, vol. 9(3), pages 219-244, October.
    • Handle: RePEc:arh:jrujec:v:9:y:2023:i:3:p:219-244
    DOI: 10.32609/j.ruje.9.111967
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    References listed on IDEAS

    as
    1. Yash P. Mehra & Bansi Sawhney, 2010. "Inflation measure, Taylor rules, and the Greenspan-Bernanke years," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 96(2Q), pages 123-151.
    2. Kyoji FUKAO & Kenta IKEUCHI & Hyeog KWON & YoungGak KIM & Tatsuji MAKINO & Miho TAKIZAWA, 2015. "Lessons from Japan's Secular Stagnation," Discussion papers 15124, Research Institute of Economy, Trade and Industry (RIETI).
    3. David Reifschneider & David Wilcox, 2021. "Another reason to raise the Fed's inflation target: An employment and output boom," Policy Briefs PB21-19, Peterson Institute for International Economics.
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    More about this item

    Keywords

    ;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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