FISCAL POLICY AND ITS’ EFFECT ON INFLATION : A quantitative study on Sweden’s economy during the Covid-19 pandemic

Sammanfattning: The covid-19 pandemic has affected the world in many different ways, people became sick and there were a lot of restrictions regarding what not to do, which in turn effected the economy. This study examines how the expansive fiscal policy in terms if supportive measures during the pandemic has affected the inflation in Sweden, this by creating an autoregressive model. Previous studies on fiscal policies effect when interest rates are low shows that expansive measures are increasing GDP and therefore has a positive effect on inflation. The expansive measures during the pandemic are correlated with the inflation, although it shows a negative effect on the yearly rate of inflation, which are in opposite direction than what could be expected.