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Working Paper
Inflation and Wage Growth Since the Pandemic
Following the worst of the COVID-19 pandemic, inflation has surged to 1980s levels in advanced economies. Motivated by vast differences in pandemic support across countries, we investigate the subsequent response of inflation and the feedback to wages. We exploit these differences to identify the effect these programs had on inflation and to examine the link between wages and inflation. Our empirical approach is based on a novel dynamic difference-in differences method based on local projections. Our estimates suggest that an increase of 5% in direct transfers (relative to trend) peaked at ...
Report
Stimulus through Insurance: The Marginal Propensity to Repay Debt
Using detailed micro data, we document that households often use “stimulus” checks to pay down debt, especially those with low net wealth-to-income ratios. To rationalize these patterns, we introduce a borrowing price schedule into an otherwise standard incomplete markets model. Because interest rates rise with debt, borrowers have increasingly larger incentives to use an additional dollar to reduce debt service payments rather than consume. Using our calibrated model, we then study whether and how this marginal propensity to repay debt (MPRD) alters the aggregate implications of fiscal ...