Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 20, 2022 erstellt
Beschreibung:
We theoretically and quantitatively analyze the impact of fiscal and monetary stimulus during and after the 2020 Covid recession on output, inflation, and house prices. Our theoretical analysis clarifies that fiscal stimulus increases consumption demand in a recession by providing liquidity, by redistributing from savers to borrowers, and by lowering the return on saving if it causes future inflation. Future inflation only occurs if taxes after the recession do not increase to pay for the stimulus. In our quantitative analysis, we study a temporary shift to passive monetary policy with low responsiveness to inflation. Fiscally-driven inflation enabled by this passive monetary policy reduces the real value of both mortgages and government debt, so it increases the spending capacity and housing demand of credit-constrained homeowners. Together with transfer payments and large fiscal deficits during the Covid recession, this policy greatly reduces the recession’s severity and causes high house prices and inflation similar to the data