This study examines the causal relationship between public expenditure and inflation for 38 OECD member countries. The analysis uses the public expenditure/GDP ratio as a proxy for public expenditure and the consumer inflation rate as a proxy for inflation. Data were obtained from an annual panel dataset compiled from the World Bank (WDI) database. Cross-sectional dependence in the variables was tested using the Pesaran CDLM and CDLMadj tests. Since this dependence was detected, stationarity analysis was conducted using the second-generation Pesaran CIPS unit root test. Furthermore, the heterogeneity of the slope coefficients in the models was verified using the Pesaran–Yamagata Delta test. In line with these findings, the panel causality approach of Emirmahmutoğlu and Köse (2011), which considers both heterogeneity and cross-sectional dependence, was applied. The results indicate that there is a unidirectional causality running from public expenditure to inflation across the panel at a 1% significance level. On a country-by-country basis, significant causality from public spending to inflation was found in Canada, Chile, France, Iceland, Israel, Korea, New Zealand, Switzerland, and Turkey, while no empirical relationship was found between inflation rates and public spending. These findings indicate that public spending in the OECD sample can influence inflation dynamics through aggregate demand and financing channels. Therefore, they demonstrate that the level of spending, as well as its composition and fiscal policy aligned with cyclical conditions, play a critical role in combating inflation.