Could engineering higher inflation help manage fiscal deficits?

Federal Reserve Bank of Chicago

A co-ordinated effort by fiscal and monetary authorities to engineer “controlled inflation” could be a solution to the ballooning fiscal deficits created by pandemic-related spending, research published by the Federal Reserve Bank of Chicago finds.

The paper proposes a policy that consists of the government separating its spending into two distinct budgets – a “regular budget”, backed by typical fiscal adjustments such as taxes and spending, and a “emergency budget”.

In contrast to the regular

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