Also Read: US Fed keeps benchmark rates steady at 23-year high-mark, projects 3 rate cuts in 2024: 5 key highlights The study investigates the impact of pandemic-induced fiscal expansions on inflation in select advanced economies (AEs) and emerging market economies (EMEs), controlling for supply-side factors. The empirical analysis suggests that countries with larger fiscal stimulus, on average, experienced higher post-pandemic inflation.
Countries with moderate fiscal support have generally experienced relatively moderate inflation outcomes. The COVID-19 pandemic triggered large-scale policy stimulus across advanced economies (AEs) and emerging market economies (EMEs).
Inflation started rising in 2021 with the easing of COVID-time restrictions and reached multi-year highs in 2022 following the Russia-Ukraine conflict. Notwithstanding common global shocks, inflation surges varied across economies, both in terms of level and persistence, the study said.
Also Read: China's central bank hints at more monetary easing The central government and the RBI introduced a judicious mix of fiscal and monetary policies and announced a special economic and comprehensive package equivalent to 10% of India’s GDP to mitigate the negative impact of the pandemic. “Fiscal policy measures in India were targeted at vulnerable segments with a primary focus on social protection and healthcare during the early stages of the pandemic, aided by additional public investment and support schemes targeting specific sectors later," it noted.
Along with the surge in inflation, the volatility also increased in the post-pandemic period, reflecting heightened macroeconomic uncertainty. Across economies, the rise in inflation started largely in the second
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