{
  "title": "It’s Never Different: Fiscal Policy Shocks and Inflation",
  "publication": "IMF Working Papers, May 12, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2023/05/12/its-never-different-fiscal-policy-shocks-and-inflation-533309",
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  "summary": "This paper investigates the impact of fiscal shocks on inflation, using a large panel of 139 countries over the period 1970–2021. First, both headline and core measures of inflation increase in response to expansionary shifts in the fiscal policy stance.",
  "sections": [
    {
      "heading": "Overview and methodology",
      "content": "- Sample: a large panel of 139 countries over the period 1970–2021.\n- Identification approaches:\n  - Local projections using fiscal policy shocks.\n  - Narrative approach.\n  - Forecast errors.\n  - Cyclically-adjusted data on government revenues and non-interest expenditures to identify exogenous changes in fiscal policy.\n- Inflation measures analyzed: both headline and core measures (including core CPI)."
    },
    {
      "heading": "Key findings",
      "content": "- Inflation response:\n  - Both headline and core measures of inflation increase in response to expansionary shifts in the fiscal policy stance.\n- Heterogeneity by country group:\n  - Fiscal policy shocks are primarily significant in developing countries.\n- Conditional effects:\n  - The inflationary impact of fiscal policy shocks depends on:\n    - Fiscal space and economic conditions at the time of the shock.\n    - Monetary policy type.\n    - Exchange rate regimes.\n    - Fiscal rules."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Fiscal policy as macro anchor:\n  - Fiscal policy is a critical anchor of macroeconomic stability.\n- Use of fiscal policy in demand management:\n  - Fiscal policy should be used with care in aggregate demand management because it has significant effects on inflation, which are highly dependent on fiscal space and economic conditions.\n- Institutional resilience:\n  - Flexible exchange rates and rule-based policymaking provide greater resilience to inflationary shocks.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/05/12/its-never-different-fiscal-policy-shocks-and-inflation-533309"
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    "Authors: Serhan Cevik, Fedor Miryugin",
    "Published: May 12, 2023",
    "Series: IMF Working Papers",
    "Sample: a large panel of 139 countries over the period 1970–2021.",
    "Identification approaches:",
    "Inflation measures analyzed: both headline and core measures (including core CPI).",
    "Inflation response:",
    "Heterogeneity by country group:",
    "Conditional effects:",
    "Fiscal policy as macro anchor:",
    "Use of fiscal policy in demand management:",
    "Institutional resilience:",
    "**Working Paper**"
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