Pandemic without lags
As the 2020 pandemic rages on and countries around the world work their way through various stages of shutdowns and re-openings, these countries are experiencing a historic adverse spending shock. Recent early successes in vaccine development have raised hopes for this shock to be temporary, and already there are signs that spending could return to its ‘normal’ levels as early as 2021.
On the inflation front, in many countries although there is some limited evidence of specific products being hoarded and isolated accounts of price-gouging, there is no evidence of wide-spread price or supply shocks.
No lags: show the effects of a temporary, one-period decrease in domestic spending in 2020, where the Bank of Canada (BoC) follows countercyclical monetary policy.
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