Covid-era fiscal policy helped fuel inflation, researchers say
Robert Barro and Francesco Bianchi say their evidence supports fiscal theory of the price level
Fiscal policy was a major factor in the recent inflation surge, new research finds, bolstering the case for the once-marginalised “fiscal theory of the price level” (FTPL).
In a working paper, Robert Barro and Francesco Bianchi examine fiscal policy’s role in driving inflation in members of the Organisation for Economic Co-operation and Development. Their empirical evidence “supports the idea that the recent fiscal expansion has been a key driver of inflation rates in the OECD countries”.
Barr
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