Researchers Attribute Post-Pandemic Inflation to Demand, Not Supply Chains

Domenico Giannone of Johns Hopkins University and Giorgio Primiceri of Northwestern University published a working paper analyzing inflation surges in Europe and the US. The researchers estimate that demand accounted for approximately 90 percent of the excess inflation experienced during the post-pandemic surge. They concluded that this inflation was primarily driven by strong demand forces, rather than supply chain issues.

The paper attributes the inflation to a combination of robust pent-up demand, stronger-than-expected expansionary fiscal policies, and an unusually accommodative monetary stance. The findings suggest that excessive demand, fueled by spending and easy money, was the main cause of the recent price increases.