Our current inflation stemmed from a fiscal shock. The Fed is slow to react. Why? Will the Fed's slow reaction spur … more inflation? I write a simple model that encompasses the Fed's mild projections and its slow reaction, and traditional … views that inflation will surge without swift rate rises. The key question is whether expectations are forward looking or …

We analyze the impact of fiscal and monetary stimulus in an economy with mortgage debt, where inflation redistributes … inflation, increasing consumption demand and house prices. The power of fiscal stimulus grows when borrowers are more indebted …. We then show quantitatively that transfers followed by easy monetary policy cause a surge in inflation which helps …

The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of … determines the path of expected inflation, while news about the present value of surpluses drives unexpected inflation. I use … fiscal theory to interpret historical episodes, including the rise and fall of inflation in the 1970s and 1980s, the long …

The post-COVID price surge has reignited interest in inflation's impact on American households. Even if anticipated and … with full market adjustments, inflation affects households through its interaction with the fiscal system, which is the … focus of this paper. Inflation affects households through its interaction with the fiscal. We run the 2019 Survey of …

(increases in current or future taxes or cuts in future spending). Within the Euro area, inflation reacts mostly to the area … recent global surges in inflation and government spending. This study applies the FTPL to 37 OECD countries for 2020 …-2022. The theory's centerpiece is the government's intertemporal budget constraint, which relates a country's inflation rate in …

inflation illusion. Illusionary investors mistake changes in nominal interest rates for changes in real rates, while smart … moves with expected inflation. The model also predicts a nonmonotonic relationship between the price-to-rent ratio on … developed. We document that many countries experienced a housing boom in the high-inflation 1970s and a second, stronger, boom …

A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example … account that inflation lowers future real mortgage costs. We decompose the price-rent ratio in a rational component -- meant … to capture the proxy effect and risk premia -- and an implied mispricing. We find that inflation and nominal interest …