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Swedish Inflation: Blame Biden!


unambiguous evidence.as Steven Kopitts Review:

Yes, Powell and Yellen [are at fault for causing the inflation and resulting banking crisis]. Nothing new there.

And, yes, the US can export inflation. If the US fiscal stimulus goes into a full employment (or upwardly constrained employment) economy, then the difference will be in imports. We expect to see a surge in the trade deficit and port congestion. We did it. We expect global supply chains to come under pressure as global prices rise. We did it. So yes, as far as I know, the US is able to export inflation.

I think Steven Kopits meant biden, not Yellen, in his comments, because Dr. Janet Yellen hasn’t been Fed chair since 2018; or he meant Yellen was the one he blamed on fiscal policy. Regardless, this graphic proves him indisputably right!

figure 1: CPI for US (blue), Eurozone (tan), UK (green), Sweden (lavender), Poland (brown) and Korea (sky blue), all unseasonally adjusted, logarithmic, 2021M01= 0. The NBER defines the peaks and troughs of U.S. recessions as shades of gray. Sources: BLS, Eurostat, OECD (from FRED) and authors’ calculations.

Of course, there isn’t a lot of empirical evidence to support the idea that US monetary policy drives foreign inflation in the way Mr Kopitts hypothesizes. See eg Figure 2 Caldara, Ferrante and Quiralto (2022). In the eighth quarter, the impact of a 100 basis point change in the federal funds rate on foreign inflation was close to zero. If you’re not bothered by the lack of empirical evidence, Swedes (and even more Poles), blame Powell (or Yellen or Biden, whoever you don’t like) for your troubles! Don’t be bothered by the fact that all of these countries have exchange rates against the dollar…

Figure 2 below depicts year-on-year inflation in these economies.

figure 2: Year-over-year CPI inflation for the US (blue), Eurozone (tan), UK (green), Sweden (lavender), Poland (brown), and South Korea (sky blue). The NBER defines the peaks and troughs of U.S. recessions as shades of gray. Sources: BLS, Eurostat, OECD (from FRED) and authors’ calculations.



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