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Money Supply and Inflation after COVID-19

Author

Listed:
  • Orkideh Gharehgozli

    (Department of Economics, Feliciano School of Business, Montclair State University, 1 Normal Avenue, Montclair, NJ 07043, USA)

  • Sunhyung Lee

    (Department of Economics, Feliciano School of Business, Montclair State University, 1 Normal Avenue, Montclair, NJ 07043, USA)

Abstract

The core personal consumption expenditure (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose to 5.2 percent on January 2022, which is the highest rate of increase since 40 years ago. Our estimates show that the annualized quarterly core PCE prices could reach 5.45% in the second quarter of 2022 and are as high as 8.57% in a longer time horizon unless corrected with restrictive monetary policies. Thus, the inflation shock since COVID-19 is not transitory, but it is persistent. As economists expect the Federal Reserve to tighten the money supply in March 2022, the insufficient policy responses may be attributed to a failure to incorporate a unique macroeconomic shock to unemployment during the pandemic. We propose a modified vector autoregression (VAR) model to examine structural shocks after COVID-19, and our proposed model performs well in forecasting future price levels in times of a pandemic.

Suggested Citation

  • Orkideh Gharehgozli & Sunhyung Lee, 2022. "Money Supply and Inflation after COVID-19," Economies, MDPI, vol. 10(5), pages 1-14, April.
    • Handle: RePEc:gam:jecomi:v:10:y:2022:i:5:p:101-:d:804393
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    References listed on IDEAS

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    Cited by:

    1. Hall, Stephen G. & Tavlas, George S. & Wang, Yongli, 2023. "Drivers and spillover effects of inflation: The United States, the euro area, and the United Kingdom☆," Journal of International Money and Finance, Elsevier, vol. 131(C).
    2. Zi Ning Zhu & Charles Ramendran SPR & Lai Soon Wong & Rosa Fernandez Alcala & Elia Garcia-Marti, 2024. "RETRACTED ARTICLE: The Influence of Four-Box Business Model on Employee Engagement in Post-COVID-19: Company Performance as the Moderator," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13309-13333, September.
    3. Olli-Pekka Hilmola, 2022. "In the Midst of the Coronavirus and Geopolitical Crises—Inventory Efficiency and Challenges Faced in Finland," JRFM, MDPI, vol. 16(1), pages 1-13, December.
    4. Rogna, Marco, 2023. "The Effects of Rising Prices on Corn Production in Western African Countries," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334549, Agricultural Economics Society - AES.
    5. Çakır, Metin & Pérez, Ana M. & Arita, Shawn & Cooper, Joseph & Nemec Boehm, Rebecca, 2024. "Perspectives on high U.S. retail food prices during 2020–2022," Food Policy, Elsevier, vol. 129(C).
    6. Abdulrahman A. Albahouth, 2025. "Inflation Rate Determinants in Saudi Arabia: A Non-Linear ARDL Approach," Sustainability, MDPI, vol. 17(3), pages 1-18, January.
    7. Mesbah Fathy Sharaf & Abdelhalem Mahmoud Shahen & Badr Abdulaziz Binzaid, 2024. "Asymmetric and Nonlinear Foreign Debt–Inflation Nexus in Brazil: Evidence from NARDL and Markov Regime Switching Approaches," Economies, MDPI, vol. 12(1), pages 1-20, January.
    8. Ali Zeb & Niu Shuhai & Obaid Ullah, 2024. "Inflationary dynamics under fiscal and monetary asymmetries: a nonlinear investigation in Pakistan," SN Business & Economics, Springer, vol. 4(12), pages 1-30, December.
    9. Mehmet Mucuk & Sümeyra Evren, 2023. "What Drives Inflation in High-inflation Countries? Evidence from Haiti, Sudan, Türkiye and Zambia," Politická ekonomie, Prague University of Economics and Business, vol. 2023(3), pages 238-266.
    10. Edoardo Beretta, 2024. "On the Inflation-Debt-Bubble “Vicious Cycle” in Times of Evolving Money—A Memorandum of Forward-Looking Lessons," Economies, MDPI, vol. 12(2), pages 1-14, January.
    11. Lingcai Liu & Taqadus Bashir & Alaa Amin Abdalla & Asma Salman & Carlos Samuel Ramos-meza & Vipin Jain & Malik Shahzad Shabbir, 2024. "Can money supply endogeneity influence bank stock returns? A case study of South Asian economies," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(2), pages 2775-2787, February.
    12. Edoardo Beretta & Doris Neuberger, 2023. "Monetary aggregates in the US since 2020 and post-COVID-19 inflation: evidence from the equation of exchange," Economics and Business Letters, Oviedo University Press, vol. 12(4), pages 321-330.
    13. Mehmet Mucuk & Sümeyra Evren, . "What Drives Inflation in High-inflation Countries? Evidence from Haiti, Sudan, Turkey and Zambia," Politická ekonomie, Prague University of Economics and Business, vol. 0.

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