A new working paper from researchers at Duke University, the U.S. Treasury Department, the Federal Reserve, and the University of Chicago pushes back on one of the most repeated economic claims of the last few years: that COVID-era stimulus checks were the main driver of the inflation spike that followed.
What the study actually found
Focusing on the auto market — one of the sectors hit hardest by post-pandemic price increases — the researchers found that COVID-era stimulus payments and Child Tax Credit payments accounted for less than 20% of the price increases between 2020 and 2022. In other words, four-fifths of the price surge in that market came from something other than direct government payments landing in people’s bank accounts.
So what did drive the price increases?
According to the study, the bulk of the increase came from a mix of factors that had little to do with stimulus checks specifically:
- Supply shortages: manufacturing and shipping disruptions that reduced the number of vehicles available to sell.
- Low interest rates: cheaper financing that made larger purchases more accessible even as prices rose.
- Easier access to credit: looser lending conditions during the period.
- A pandemic-driven shift in spending: with dining out, travel, and other services curtailed, more household spending shifted toward physical goods like cars, increasing demand pressure on an already constrained supply.
Why this study comes with an asterisk
It’s important to be precise about what this is: a preliminary working paper that has not yet been peer-reviewed. That doesn’t mean the findings are wrong, but it does mean they haven’t yet gone through the standard academic vetting process that economics papers typically undergo before being treated as settled research. Other economists have argued, in past analyses, that stimulus spending played a more "sizable role" in inflation than this new paper suggests — the debate over exactly how much blame belongs to stimulus payments, as opposed to supply-side and monetary factors, is still very much unresolved.
Why it matters beyond academic debate
This isn’t just an abstract argument for economists. The claim that stimulus checks caused inflation has shaped real policy conversations — including current debates over whether any new stimulus-style payments (tariff rebates, dividend checks, and similar proposals) might reignite price increases. If direct payments played a smaller role than commonly assumed, that changes the calculus for policymakers weighing future relief payments against inflation risk.
FAQ
Q. Does this study prove stimulus checks had no effect on inflation?
No. It found stimulus and Child Tax Credit payments accounted for less than 20% of price increases in the auto market specifically — not zero effect, but a smaller share than commonly assumed, and only in one sector.
Q. Is this the final word on stimulus and inflation?
No. The paper is a preliminary, non-peer-reviewed working paper, and other research has reached different conclusions about how much stimulus spending contributed to inflation.
Q. Does this apply to all sectors of the economy, not just cars?
The specific 20% figure comes from analysis of the auto market. The paper doesn’t claim the same percentage applies uniformly across all goods and services.
How Much Did COVID Stimulus Checks Spur Inflation? | Chicago Booth Review