Quote:
Originally Posted by Bring_Back_Shantz
Experts/Economists: We have come to the conclusion that Government transfers ("Printing money") is not the major cause of inflation.
Yoho: Yeah, but I'm pretty sure it was though...
I'm convinced.
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I'm far from knowledgeable on this stuff but the subsequent points in the report, which were excluded from that tweet, are probably pretty important and significant:
Quote:
c. The welcome, but likely exaggerated, fiscal support provided by the Federal government in response to the pandemic: the Canada Emergency Response Benefit, the Canada Recovery Benefit, the Canada Wage Subsidy, and the Canada Rent Relief Program had a major impact on the output gap. We estimate that these programs raised the output gap by about 1.3 percentage points, implying that the excess demand we see now in Canada would not be present without these supports.
d. While the impact of these programs on the output gap is large, the empirical impact of the output gap on inflation is modest, leading us to estimate that government transfers account for around 0.45 percentage points of the rise in inflation we have observed since the end of 2019.
e. While 0.45% is small given the size of the other factors driving inflation, it still necessitates a substantial monetary response. We estimate that up to 125bps of the total rise of 400bps that we currently expect (from 0.25% at the start of the tightening phase to our expected endpoint of 4.25%) is in response to pandemic support measures.
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