Wolfers approves of COVID relief policy choices, despite inflationary pressure

July 4, 2022 ABC Australia

As the world's economies struggle with inflation, and central banks ponder rate increases which could trigger an economic slowdown and recession, ABC Australia asks, "In their enthusiasm to stamp out inflation, could central banks snuff out growth and tip the global economy into recession?"

The inflation may be attributed to stimulus spending during the pandemic, as well as pent-up demand, and global supply chain blockages.

Ford School professor Justin Wolfers said the benefits from all that pandemic stimulus outweighs the hangover.

"I want you to think back to how you felt in the middle of 2020, when we were all shut at home fearful of coronavirus," he says. "If you'd offered me a choice back then: should we as policy makers do too much, which will hopefully get the economy back on track, people back to work and risk a little bit of inflation; or should we do too little? I would have put all my chips across the table and said, let's do too much."

The net result is that, along with an inflation breakout, unemployment is at its lowest level in nearly half a century after an astonishingly swift bounce back from the deepest recession in a century.