Key Takeaways
- The inflation surge was global, but its underlying drivers differed across countries. In the United States, excess demand combined with inelastic supply to generate the inflation surge.
- Monetary policy flexibility is critical when inflation risks are outsized, and forecasting errors are likely.
- On fiscal policy, the difficulty of identifying real-time capacity constraints strengthens the case for greater automatic adjustment features.
- Anchored inflation expectations played a critical role in enabling rapid disinflation in the early 2020s—but they cannot be taken for granted going forward.
- Official inflation statistics performed well during the COVID era, but continued investment in measurement capacity is essential.
During the recovery from COVID-19, inflation in the United States and many other countries surged to its highest level in more than 40 years, inflicting enormous pain on households and businesses, upending fundamental patterns of economic activity, and changing the course of politics and societies worldwide. To distill lessons from that era, the Peterson Institute for International Economics spearheaded a special project—codirected by Karen Dynan and David Wilcox—convening leading experts to examine different facets of the inflation surge, including supply-side disruptions, demand dynamics, labor markets, fiscal and monetary policy interactions, and inflation measurement. Their published papers are brought together in this PIIE Briefing.
Contents
PIIE Policy Brief 26-3
1 The COVID era Inflation surge: Causes, consequences, and policy lessons
Karen Dynan and David Wilcox
PIIE Policy Brief 24-2
2 The inflation surge in Europe
Patrick Honohan
PIIE Working Paper 24-21
3 The trinity of COVID era inflation in G7 economies
Joseph E. Gagnon and Asher Rose
PIIE Working Paper 24-22
4 Fiscal policy and the pandemic-era surge in US inflation: Lessons for the future
Karen Dynan and Douglas Elmendorf
PIIE Policy Brief 24-10
5 Did supply chains deliver pandemic-era inflation?
Phil Levy
PIIE Working Paper 24-13
6 US monetary policy and the recent surge in inflation
David Reifschneider
PIIE Policy Brief 24-11
7 Was something structurally wrong at the FOMC?
Alan S. Blinder
PIIE Policy Brief 24-3
8 The influence of gasoline and food prices on consumer expectations and attitudes in the COVID era
Joanne Hsu
PIIE Working Paper 25-1
9 Why did inflation rise and fall so rapidly? Lessons from the Korean War
Joseph E. Gagnon and Asher Rose
PIIE Working Paper 25-7
10 The role of long histories of "lived experience" in the COVID era inflationary surge
Joseph E. Gagnon and Steven Kamin
PIIE Working Paper 25-3
11 Modernizing price measurement and evaluating recent critiques of the consumer price index
Daniel E. Sichel and Christopher Mackie
PIIE Working Paper 24-23
12 Labor market tightness and inflation before and after the COVID-19 pandemic
Justin Bloesch
PIIE Working Paper 25-5
13 US wage patterns during and after the pandemic: Insights from a novel data source
Jeff Nezaj, Nela Richardson, and Liv Wang
Data Disclosure:
The data underlying this analysis can be downloaded from the published papers listed on the project webpage here.
