Download or read book Labor Markets Fiscal Policy and Inflation Dynamics written by Salem M. Abo-Zaid and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the early months of the COVID-19 pandemic, inflation fell. Later, as the pandemic wore on, inflation has risen sharply, reaching a 40-year high. To explain the dynamics of inflation, we augment the standard labor search and matching model with a shock that affects the demand side of the economy and matching in the labor market. We illustrate that the inflation rate is strongly tied to the behavior of vacancies and labor market tightness. This pattern is observed in European countries too. In addition, downward nominal wage rigidity plays a role in explaining the behavior of wage inflation and, consequently, price inflation. Fiscal policy improves the performance of the model, but it cannot sufficiently replicate the behavior of inflation to the same extent that frictions in the matching process do.
Download or read book Labour Market and Fiscal Policy Adjustments to Shocks written by Nombulelo Gumata and published by Springer. This book was released on 2017-12-18 with total page 617 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on the implications of the South African labour market dynamics including labour market reforms and fiscal policy for monetary policy and financial stability. Evidence suggests there are benefits in adopting an approach that coordinates labour market policies and reforms, fiscal policy, price and financial stability. In particular, the benefits of coordinating policies present policymakers with policy options in cases where they are confronted by binding policy trade-offs and dilemmas, such as in cases when there is divergence in price and financial and economic growth outcomes. The empirical insights and policy recommendations are based on different techniques that include the counterfactual and endogenous-exogenous approaches, non-linearities introduced by thresholds and the impact of persistent and transitory shock effects. Themes covered in the book include various aspects of labour market conditions and reforms and their link to inflation and inflation expectations, the impact of the national minimum wage, the interaction between public and private sector wage inflation, economic policy uncertainty and employment, government debt thresholds, sovereign yields and debt ratings downgrades, labour productivity, the impact of inflation regimes on expansionary fiscal and monetary policy multipliers, the increase in government cost of funding on price and financial stability and the link between fiscal policy and credit dynamics.
Download or read book Unconventional Fiscal Policy in Times of High Inflation written by Mai Dao and published by International Monetary Fund. This book was released on 2023-09 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: The surge in energy prices in 2022 has been a defining factor behind the increase in euro area inflation. We assess the impact of “unconventional fiscal policy,” defined as the set of fiscal measures, possibly expansionary, motivated by a desire to mute the effects of the increase in energy prices and to lower inflation. Overall, we find that these unconventional measures reduced euro area inflation by 1 to 2 percentage points in 2022 and may avoid an undershoot later on. When nonlinearities in the Phillips curve are taken into account, the net effect is to reduce inflation by about 0.5 percentage points in 2021-24, and keep it nearer to its target. About one-third to one-half of the reduction in 2022 reflects the direct effects of the measures on headline inflation, with much of the remainder reflecting the lower pass-through to core inflation. The fiscal measures were deficit-financed but had limited effects on raising inflation by stimulating demand and instead modestly helped to stabilize longer-term inflation expectations. Looking ahead, the prospective decline in inflation in the euro area is partly due to fortunate circumstances, with energy prices falling from their 2022 peaks and their pass-through effects fading, and with less economic overheating than in economies such as the United States. Implementing similar measures in the face of a more persistent increase in energy prices, or in a more overheated economy, would have caused a more persistent rise in core inflation.
Download or read book Inflation Dynamics in Bulgaria The Role of Policies written by Anh D. M. Nguyen and published by International Monetary Fund. This book was released on 2023-09-29 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyses inflation dynamics in Bulgaria using different complementary econometrics technics. We find that common factors play a large role in the EU’s inflation variation but impact individual countries differently due to country-specific factors. Greater weight of energy and food in Bulgaria’s CPI basket amplifies the impact of shocks on headline inflation. Furthermore, second-round effects in Bulgaria are likely pronounced, associated with a higher inflation persistence compared to the EU countries. Recent ECB monetary tightening has been insufficient for Bulgaria and its transmission is weak. Fiscal policy supported the recovery from the COVID crisis but added to inflation.
Download or read book Essays on Inflation Dynamics and Labour Market Frictions written by Paul Middleditch and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The inflation equation, more commonly known as the Phillips curve, lies at the heart of modern macroeconomic modeling. This Keynesian relationship between inflation and unemployment discovered by Phillips (1958) soon became widely adopted by policymakers in the 1960's. However, its empirical shortcomings led to competing theories such as the natural rate hypothesis by Friedman (1968), who alongside Phelps (1967) and Lucas (1972), condemned its implications of money non neutrality. More recently, the specification has adapted to capture nominal inertia led by the New Keynesian school of Fisher (1977) and Taylor (1980), as an answer to the classical result of neutrality. The Phillips curve remains as a relationship of interest to capture the aggregate behaviour of the supply side in the economy, connecting the labour market and the pricing decisions of firms. This Thesis consists of three self contained works, each of which are set out within their own chapter but connected by the employment of the theoretical framework of this inflation equation. They attempt to answer three specific economic questions related to inflation dynamics and labour market frictions. The first analysis concerns itself with the labour market policy of the working hours restriction; specifically with the question of how this labour market policy affects unemployment in the long run. I find weak evidence of a fall in unemployment shortly after the announcement of this policy. Secondly, whether or not one can capture the different characteristics displayed by the labour markets of the US and EU using labour market frictions in the determination of inflation dynamics. Our findings lead us to the conclusion that it is indeed possible to capture these characteristics when analyzing a Phillips curve specified in terms of unemployment. Lastly the question of whether aggregate prices are better represented by controlling for heterogeneity. The results obtained lead us to infer that controlling for heterogeneity of this kind does indeed affect the dynamics of the macro model and does not wash out in the aggregate.
Download or read book Brookings Papers on Economic Activity Fall 2019 written by Janice Eberly and published by Brookings Institution Press. This book was released on 2020-08-25 with total page 541 pages. Available in PDF, EPUB and Kindle. Book excerpt: Brookings Papers on Economic Activity (BPEA) provides academic and business economists, government officials, and members of the financial and business communities with timely research on current economic issues. Contents: All Medicaid Expansions Are Not Created Equal: The Geography and Targeting of the Affordable Care Act Craig Garthwaite, John Graves, Tal Gross, Zeynal Karaca, Victoria Marone, and Matthew J. Notowidigdo Policies and Payoffs to Addressing America’s College Graduation Deficit Christopher Avery, Jessica Howell, Matea Pender, and Bruce Sacerdote The Optimal Inflation Target and the Natural Rate of Interest Philippe Andrade, Jordi Galí, Hervé Le Bihan, and Julien Matheron Inflation Dynamics: Dead, Dormant, or Determined Abroad? Kristen J. Forbes Macri’s Macro: The Elusive Road to Stability and Growth Federico Sturzenegger Progressive Wealth Taxation Emmanuel Saez and Gabriel Zucman
Download or read book Inflation Dynamics in the Presence of Informal Labour Markets written by Paul Castillo and published by . This book was released on 2014 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we analyze the effects of informal labor markets on the dynamics of inflation and on the transmission of aggregate demand and supply shocks. In doing so, we incorporate the informal sector in a modified New Keynesian model with labor market frictions as in the Diamond-Mortensen-Pissarides model. Our main results show that the informal economy generates a "buffer" effect that diminishes the pressure of demand shocks on inflation. This finding is consistent with the empirical literature on the effects of informal labor markets in business cycle fluctuations. This result implies that, in economies with large informal labor markets, changes in interest rates are more effective in stimulating real output and there is less impact on inflation. Furthermore, the model produces cyclical flows from informal to formal employment, consistent with the data.
Download or read book Drivers of Inflation written by Estefania Cohn-Bech and published by International Monetary Fund. This book was released on 2023-02-26 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: Though high and rising inflation has been a challenge for most economies across Europe in 2022 and into 2023, it has accelerated in Hungary to the highest level in Europe. This paper examines how and why Hungary reached historically high inflation. It draws on an augmented Phillips Curve to estimate the impact of common drivers of inflation, examines the role of labor market tightness and policy stances, and analyzes possible changes to the degree of exchange rate pass-through in recent years. Overall, a rapid recovery from the COVID-19 crisis, a series of exogenous shocks, and too loose a policy mix fueled inflation to its highest level in decades. Though monetary and fiscal policies are now tightening, regulatory price caps undermine those efforts. Going forward, a consistently and persistently tight overall policy mix is needed to drive inflation back to the central bank’s target.
Download or read book High Inflation in the Baltics Disentangling Inflation Dynamics and Its Impact on Competitiveness written by Alice Fan and published by International Monetary Fund. This book was released on 2024-03-15 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper identifies and quantifies the drivers of inflation dynamics in the three Baltic economies and assesses the effectiveness of fiscal policy in fighting inflation. It also analyzes the macroeconomic impact of inflation on competitiveness by focusing on the relationship between wages and productivity in the tradeable sector. The results reveal that inflation in the Baltics is largely driven by global factors, but domestic demand matters as well, suggesting that fiscal policy can play a role in containing inflation. Also, there is robust evidence of a long-run (cointegration) relationship between (real) wages in the tradeable (manufacturing) sector and productivity in the Baltics with short-term deviations self-correcting in Estonia and Lithuania only.
Download or read book Studies in Macroeconomic Theory written by Edmund S. Phelps and published by Academic Press. This book was released on 2014-05-10 with total page 433 pages. Available in PDF, EPUB and Kindle. Book excerpt: Studies in Macroeconomic Theory, Volume 1: Employment and Inflation is a collection of scholarly papers that accounts the development of a microeconomic theory of wage and price decisions and commitments. The book presents some features of the modern inflationary process and makes sense of some still accepted elements in the postclassical macroeconomics of Keynes and Phillips. The papers in this volume are grouped into seven sections. Part I describes disequilibrium models of employment. Part II gives closer scrutiny to the idea of the "natural" rate of unemployment. Part III studies the welfare economics of inflation in an equilibrium context. The fourth part deals with inflation planning. The papers in Part V discuss hypotheses about the causes of the rise in the rate of inflation in two historical episodes: the American inflation between 1955 - 1957 and 1972 - 1974. Part VI addresses some questions in the theory of economic stabilization by monetary and fiscal policy. The final section of this volume attempts to apply to matters of stochastic social choice, stabilization policy being one instance of such a choice, the conception of justice advanced by Rawls. The compendium will be of value to economists and economic policy makers.
Download or read book The Role of Real Wage Rigidity and Labor Market Frictions for Unemployment and Inflation Dynamics written by Kai Christoffel and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Inflation Dynamics with Search Frictions written by Michael Krause and published by . This book was released on 2008 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: The New Keynesian Phillips curve explains inflation dynamics as being driven by current and expected future real marginal costs. In competitive labor markets, the labor share can serve as a proxy for the latter. In this paper, we study the role of real marginal cost components implied by search frictions in the labor market. We construct a measure of real marginal costs by using newly available labor market data on worker finding rates. Over the business cycle, the measure is highly correlated with the labor share. Estimates of the Phillips curve using GMM reveal that the marginal cost measure remains significant, and that inflation dynamics are mainly driven by the foward-looking component. Bayesian estimation of the full New Keynesian model with search frictions help us disentangle which shocks are driving the economy to generate the observed unit labor cost dynamics. We find that mark-up shocks are the dominant force in labor market fluctuations.
Download or read book Labor and Product Market Reforms in Advanced Economies written by Angana Banerji and published by International Monetary Fund. This book was released on 2017-03-13 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: Product and labor market reforms are needed to lift persistently sluggish growth in advanced economies. But reforms have progressed slowly because of concerns about their distributive and short-term economic effects. Our analysis, based on new empirical and numerical analysis and country case-studies shows that most labor and product market reforms can improve public debt dynamics over the medium-term. This because reforms raise output by boosting employment and/or labor productivity. But the effect of some labor market reforms on budgetary outcomes and fiscal sustainability depends critically on business cycle conditions. Our evidence also suggests that some temporary and well-designed up-front fiscal stimulus can help enhance the economic impact of reforms. In the past, countries have used fiscal incentives in the past to facilitate reforms by alleviating transition and social costs. But strong ownership of reforms was crucial for their successful implementation.
Download or read book Labor Market Search Wage Bargaining and Inflation Dynamics written by and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Understanding Inflation and the Implications for Monetary Policy written by Jeff Fuhrer and published by MIT Press. This book was released on 2009-09-11 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: Current perspectives on the Phillips curve, a core macroeconomic concept that treats the relationship between inflation and unemployment. In 1958, economist A. W. Phillips published an article describing what he observed to be the inverse relationship between inflation and unemployment; subsequently, the “Phillips curve” became a central concept in macroeconomic analysis and policymaking. But today's Phillips curve is not the same as the original one from fifty years ago; the economy, our understanding of price setting behavior, the determinants of inflation, and the role of monetary policy have evolved significantly since then. In this book, some of the top economists working today reexamine the theoretical and empirical validity of the Phillips curve in its more recent specifications. The contributors consider such questions as what economists have learned about price and wage setting and inflation expectations that would improve the way we use and formulate the Phillips curve, what the Phillips curve approach can teach us about inflation dynamics, and how these lessons can be applied to improving the conduct of monetary policy. Contributors Lawrence Ball, Ben Bernanke, Oliver Blanchard, V. V. Chari, William T. Dickens, Stanley Fischer, Jeff Fuhrer, Jordi Gali, Michael T. Kiley, Robert G. King, Donald L. Kohn, Yolanda K. Kodrzycki, Jane Sneddon Little, Bartisz Mackowiak, N. Gregory Mankiw, Virgiliu Midrigan, Giovanni P. Olivei, Athanasios Orphanides, Adrian R. Pagan, Christopher A. Pissarides, Lucrezia Reichlin, Paul A. Samuelson, Christopher A. Sims, Frank R. Smets, Robert M. Solow, Jürgen Stark, James H. Stock, Lars E. O. Svensson, John B. Taylor, Mark W. Watson
Download or read book The Role of Real Wage Rigidity and Labor Market Frictions for Unemployment and Inflation Dynamics written by Kai Philipp Christoffel and published by . This book was released on 2016 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we incorporate a labor market with matching frictions and wage.
