The monetary and fiscal stimulus implemented since the coronavirus erupted has been sizable, and policymakers around the world have acted with unprecedented speed. While it is broadly recognized that this stimulus was necessary, the resulting increases in government debt and central bank liquidity have given rise to concerns that an upsurge in global inflation may be around the corner.

Looking at a range of global data, we find little evidence to support such fears. In recent decades, inflation has become increasingly divorced from money growth. This is true in the advanced economies and, to a somewhat lesser extent, in the emerging markets as well. We also find evidence suggesting that rather than fueling demand for goods and services, and thus higher inflation, the rising money stock  has driven demand for financial assets.

As for government debt levels, the data for the advanced economies suggest that heavier debt burdens have b rought lower inflation and slower GDP growth. The cost of high debt is not inflation but rather seems to be disinflation and weak economic performance, reflecting increased uncertainties for the private sector. For the emerging markets, in contrast, higher debt levels do appear to be associated with increased inflation, but the relationship falls well short of statistical significance.

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