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Fiscalflation in Germany? Applying the FTPL to Post-Pandemic Inflation

Florian Frühhaber

Applied Economics Quarterly2023https://doi.org/10.3790/aeq.2023.1471804article
ABDC B
Weight
0.26

Abstract

This paper applies the fiscal theory of the price level (FTPL) to study the drivers of inflation in Germany following the pandemic. The empirical analysis uses a novel empirical approach built on the FTPL’s equilibrium condition. We find that the FTPL predicts an increase in the equilibrium price level of 6 % from 2019 to 2022. The increase is driven by higher discount rates. In contrast, fiscal deficits had a mild deflationary effect. Only if expectations regarding the future structural fiscal stance changed during these years, would the FTPL be able to link the observed inflation surge to fiscal policy behavior.

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https://doi.org/https://doi.org/10.3790/aeq.2023.1471804

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@article{florian2023,
  title        = {{Fiscalflation in Germany? Applying the FTPL to Post-Pandemic Inflation}},
  author       = {Florian Frühhaber},
  journal      = {Applied Economics Quarterly},
  year         = {2023},
  doi          = {https://doi.org/https://doi.org/10.3790/aeq.2023.1471804},
}

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Evidence weight

0.26

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.00 × 0.4 = 0.00
M · momentum0.20 × 0.15 = 0.03
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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