Inflationary Effects of Fiscal Support to Households and Firms

Authors

Galina Hale

John Leer

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2023-02 | January 1, 2023

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 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.

Article Citation

Nechio, Fernanda, Galina Hale, and John Leer. 2023. “Inflationary Effects of Fiscal Support to Households and Firms,” Federal Reserve Bank of San Francisco Working Paper 2023-02. Available at https://doi.org/10.24148/wp2023-02

About the Author
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Fernanda Nechio is a vice president in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Fernanda Nechio