Covid-19 and Inflation Rate: An Evidence for OECD Countries

Covid-19 has affected the world’s economy since 2019. The coronavirus pandemic is one of the most severe and dangerous problems that humanity has faced in the last century. Therefore, this paper aims to investigate the impact of Covid-19 on the inflation rate in the 36 OECD member countries. Monthly data on Covid-19 and the inflation rate from February 2020 to August 2021 and the quantile panel regression method have been used to achieve this purpose. The results show that new cases of Covid-19 decrease the inflation rate in all quantiles, which means that by increasing the number of Covid-19 cases, economic activities decrease because of the business restrictions. Moreover, the new deaths of Covid-19 have a dual impact on the inflation rate in OECD countries. With increasing in Covid-19 deaths, business restrictions have increased, the economy has entered a recession, and inflation has decreased. On the other hand, the growth of Covid-19 casualties could increase economic uncertainty and inflation. Furthermore, Covid-19 vaccinations have positive and significant effects on the inflation rate in OECD countries. Accordingly, policymakers are advised to include increasing vaccine injections, especially booster doses, to increase economic activity and prosperity in OECD and world economies. Furthermore, Covid-19 showed the necessity of preparing the world against infectious diseases in the future.