Quantifying the Inflationary Impact of Fiscal Stimulus Under Supply Constraints
Working Paper 30892
This paper builds on Baqaee and Farhi (2022) and di Giovanni et al. (2022) to quantify the contribution of fiscal policy on U.S. inflation over the Dec-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.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research or those of the Federal Reserve Banks of New York or any other person affiliated with the Federal Reserve System.