Inflationary Effects of Fiscal Support to Households and Firms
Working Paper 30906
DOI 10.3386/w30906
Issue Date
Fiscal support measures in response to the COVID-19 pandemic varied in their targeted beneficiaries. Relying on variability across 10 large economies, we study differences in the inflationary effects of fiscal support measures targeting consumers or businesses. Because conventional measures of real activity were distorted, we control for the underlying state of the real economy using households sentiment data. We find that fiscal support measures to consumers, but not firms, had inflationary effects that manifested 5 weeks following the announcement and peaked at 12 weeks. The magnitude of the effect was larger in an environment of improving consumer sentiment.
Non-Technical Summaries
- Government measures designed to soften the blow of the COVID-19-related recession had different inflationary impacts depending on...