Do Enlarged Fiscal Deficits Cause Inflation: The Historical Record

Bordo, Michael D.; Levy, Mickey D.

doi:10.3386/w28195

Cited by 12 publications

(4 citation statements)

References 40 publications

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“…fiskální teorie cenové hladiny tak, jak je popsána, např. Sims (2011), Bordo et al (2020) nebo Cochrane (2021). 18 Převis peněžní zásoby nad trendem poptávky po penězích vytváří pouze prostor pro dodatečnou inflaci, její dynamiku (tj.…”

Section: Poptávka Po Penězích a úVahy O Budoucím Vývojiunclassified

Fiscal Deficit and Money Issuance in Czech Republic during COVID-19 Pandemic

Kubíček¹,

Morda²

2023

Politicka ekonomie

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Fiscal Deficit and Money Issuance in Czech Republic during COVID-19 PandemicThe public finances of the Czech Republic fell into deep deficits during the pandemic, while the money supply growth rate accelerated. We make a basic comparison of monetary acceleration during the first two years of the pandemic with other countries. We verify that this acceleration in the Czech Republic was partly due to commercial banks increasing credit to the government. We argue that purchases of government bonds by non-residents have a similar effect. This is particularly true when non-residents use existing koruna deposits held by them, partly as a result of past foreign exchange interventions, to purchase government bonds. While there was an acceleration in monetary growth during the pandemic, there was a decline in monetary growth during the Great Financial Crisis (GFC). However, our analysis suggests that this was due mainly to a decline in private credit growth during the GFC. We see no fundamental reasons for a structural change in money demand as a result of the pandemic. We therefore believe that unless the observed monetary acceleration is offset by slower-than-trend monetary growth in the near term, it will translate into an increase in the price level.

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Section: Poptávka Po Penězích a úVahy O Budoucím Vývojiunclassified

Fiscal Deficit and Money Issuance in Czech Republic during COVID-19 Pandemic

Kubíček¹,

Morda²

2023

Politicka ekonomie

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“…Thereafter, the debt-to-GDP ratio fell to 98.4 percent in 2021 and then slightly more to 97 percent in 2022. 19 There is a long literature on the connection between expansionary fiscal policy and inflation (e.g., Bordo and Levy, 2020). Figure 4 plots CPI inflation since the Civil War.…”

Section: Major Us Wars Government Debt and Inflationmentioning

confidence: 99%

The COVID-19 Pandemic and Inflation: Lessons from Major US Wars

Kliesen,

Wheelock

2023

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“…Any evidence to which extent the new fiscal tools already have a measurable impact on spreads is of substantial monetary policy relevance as it may help to assess potential risks for the effective independence of the ECB in the future. If the containment of risk premiums for euro area countries crucially hinges on ECB support, this points to the risk of fiscal dominance (Bordo and Levy 2020). In a regime of fiscal dominance, the ECB is effectively forced to continuously finance euro area countries even if they are close to (or even already in) insolvency in order to prevent a new debt and financial crisis.…”

Section: Figure 1: Government Bond Spreads Of Ten Euro Area Countries In the Crisis Year 2020mentioning

confidence: 99%

Dispelling the Shadow of Fiscal Dominance? Fiscal and Monetary Announcement Effects for Euro Area Sovereign Spreads in the Corona Pandemic

et al. 2021

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Do Enlarged Fiscal Deficits Cause Inflation: The Historical Record

Cited by 12 publications

References 40 publications

Fiscal Deficit and Money Issuance in Czech Republic during COVID-19 Pandemic

Fiscal Deficit and Money Issuance in Czech Republic during COVID-19 Pandemic

The COVID-19 Pandemic and Inflation: Lessons from Major US Wars

Dispelling the Shadow of Fiscal Dominance? Fiscal and Monetary Announcement Effects for Euro Area Sovereign Spreads in the Corona Pandemic

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