The Rise (And Fall?) of Inflation in Canada: A Detailed Analysis of Its Post-Pandemic Experience

22 Pages Posted: 12 Sep 2022

See all articles by Yu Chen

Yu Chen

University of Calgary - Department of Economics

Trevor Tombe

University of Calgary - Department of Economics

Date Written: September 10, 2022

Abstract

Canada's inflation rate rose from 3.1 percent in June 2021 to 8.1 percent one year later. What is behind this rapid surge? And will higher interest rates ease the pressure? We explore these questions with a detailed analysis of recently rising inflation. We find a few items dominate, especially energy and items sensitive to oil prices. To separate demand- from supply-driven inflation, we use detailed household expenditure data and find rising inflation is primarily the latter. We also find items with normally transitory price changes or those highly sensitive to interest rates also account for nearly all of inflation's rise. While much uncertainty remains, time and tighter monetary policy may likely help decrease inflation.

Keywords: inflation, supply shocks, monetary policy

JEL Classification: E31, E58, E65

Suggested Citation

Chen, Yu and Tombe, Trevor, The Rise (And Fall?) of Inflation in Canada: A Detailed Analysis of Its Post-Pandemic Experience (September 10, 2022). Available at SSRN: https://ssrn.com/abstract=4215492 or http://dx.doi.org/10.2139/ssrn.4215492

Yu Chen

University of Calgary - Department of Economics ( email )

Trevor Tombe (Contact Author)

University of Calgary - Department of Economics ( email )

2500 University Drive NW
Calgary, Alberta T2N 1N4
Canada
403-220-8068 (Phone)

HOME PAGE: http://www.trevortombe.com

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