The study confirms that behind most rampant price inflations in history is excessive government spending! It is no different this time!
Massive trillion dollar deficit-financed fiscal transfers in the U.S. and other Western countries fueled price inflation! Plus, add to this the more than one decade of ultra low interest rates as a result of a colossal failure of monetary policy!
From the abstract:
"This paper builds on Baqaee and Farhi (2022) and di Giovanni et al. (2022) to quantify the contribution of fiscal policy to U.S. inflation over the December 2019-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."
No comments:
Post a Comment