First, the role of government has been steadily growing in size and scope.15 Since the 1980s, there have been periods when attempts were made to curb such growth, but the uptrend continues. Analyzing the effects of government regulation is not straightforward since the nature of such regulations may matter, but it is safe to say at least that they have tended to proliferate.
Inflation has trended downward during this same period. Also, we can find no clear relationship between inflation rates and the ratio to GDP of government spending or government debt (Charts 7 and 8). With regard to the second factor, it is unclear whether the slowdown in growth rates is inflationary or deflationary in nature.