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Quantifying the Inflationary Impact of Fiscal Stimulus under Supply Constraints

FRB of New York Staff Report No. 1050, 2023

10 Pages Posted: 3 Feb 2023

See all articles by Julian di Giovanni

Julian di Giovanni

Federal Reserve Banks - Federal Reserve Bank of New York; Centre for Economic Policy Research (CEPR)

Sebnem Kalemli-Ozcan

University of Maryland

Alvaro Silva

University of Maryland

Muhammed Ali Yildirim

Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2023

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.

Keywords: inflation, fiscal policy, supply constraints

JEL Classification: E23, E31, E32

Suggested Citation

di Giovanni, Julian and Kalemli-Ozcan, Sebnem and Silva, Alvaro and Yildirim, Muhammed Ali, Quantifying the Inflationary Impact of Fiscal Stimulus under Supply Constraints (February 2023). FRB of New York Staff Report No. 1050, 2023, Available at SSRN: https://ssrn.com/abstract=4347222 or http://dx.doi.org/10.2139/ssrn.4347222

Julian Di Giovanni (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

HOME PAGE: http://julian.digiovanni.ca

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://julian.digiovanni.ca

Sebnem Kalemli-Ozcan

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Alvaro Silva

University of Maryland ( email )

Muhammed Ali Yildirim

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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