Why I Don’t Think It Was Only Demand Shocks that Drove 2022-23 Inflation

From a lecture prepared for “Macroeconomic Policy” (Spring 2024):

Figure 1: Output gap (black, left scale), CBO projected output gap (pink, left scale), and PCE deflator y/y inflation (teal, right scale). NBER defined peak-to-trough recession dates shaded gray. Source: BEA 2023Q4 advance, CBO Budget and Economic Outlook, Feb 2024, NBER, and author’s calculations.

The large increase in inflation seems quite outsized compared to the relatively small positive output gap.

A more formal argument by Adam Shapiro (SF Fed) here.

4 thoughts on “Why I Don’t Think It Was Only Demand Shocks that Drove 2022-23 Inflation

  1. Moses Herzog

    Uuuuuhh, what he said. I actually felt pretty strongly about inflation (specifically the recent “bout” of inflation) not being demand based, but didn’t know the proper way to express that or argue that with economics.

    Is the rumor true that if Travis Kelce scored a touchdown tonight everyone in the stadium was the receive free versions of the Pixbim AI lip-sync app and a commemorative lavender colored training bra??

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *