Can we state with high confidence that Biden's stimulus packages were indeed a major factor in the spiraling (or, at least, pretty high) inflation in the US? Did Biden go over the top with it after all?


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First of all there is no evidence inflation would be currently spiralling in the U.S. right now. Spiraling inflation occurs where price inflation feeds wage inflation and wage inflation feeds price inflation. It is simply too early to tell at this point if there is wage-price inflation spiral or no. There is no research or clear data showing that yet, at best one could say US could be at a beginning of inflation spiral.

Second there is no empirical evidence yet for Biden stimulus in particular being the cause of high inflation in the US, empirical research is impossible in real time, you will have to wait at least 1-2-3 years for people to even be able to start looking at that question empirically.

However, theoretically and past empirical empirical evidence does suggest that inflation is caused by monetary policy coupled with increased fiscal spending (Cochrane 2021). However, the fiscal stimulus must be coupled with looser monetary policy. If government just founded all the stimulus checks by increasing taxes on everyone the effect of stimulus and higher taxes would just cancel each other (there could be some changes in relative prices but aggregate price level should remain unchanged).

Consequently, it is fair to say that under our current understanding of inflation causes, Biden stimulus coupled with loose monetary policy was expected to cause higher inflation. However, note inflation can be also caused by other factors than fiscal policy, so the stimulus might be not the only cause. To empirically sort this out and to say how much stimulus itself contributed to higher inflation you need to run empirical studies which cannot be done in real time.


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