Fiscal Policy and the Pandemic-Era Surge in US Inflation: Lessons for the Future

This chapter analyzes how large-scale fiscal expansion during the COVID-19 pandemic contributed to the surge in U.S. inflation. The authors argue that fiscal stimulus successfully accelerated the economic recovery and reduced unemployment but also pushed aggregate demand beyond the economy’s productive capacity, contributing to temporarily elevated inflation. The chapter evaluates the relative roles of demand pressures and supply constraints and draws lessons for the design of future fiscal stabilization policies during economic crises.