Arbeitspapier
The changing link between labor cost and price inflation in the United States
The link between US labor cost and price inflation has weakened notably over the past three decades. In this paper we document this decline and analyse potential contributing factors. We consider four important trends that have shaped the US economy of late: (i) improved anchoring of inflation expectations; (ii) the changing constellation of shocks hitting the economy; (iii) increased trade integration and (iv) rising firm market power. We find that the improved anchoring of inflation expectations has played a particularly relevant role but also that the latter two trends offer promising avenues to understand the decline in pass-through from labor cost to price inflation. Our results also bring supportive evidence to the view taken by the FED in the context of its monetary policy strategy review that a robust job market can be sustained without causing an outbreak of inflation.
- ISBN
-
978-92-899-4806-7
- Language
-
Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 2583
- Classification
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Price Level; Inflation; Deflation
- Subject
-
Inflation
pass-through
labor costs
structural VAR
United States
- Event
-
Geistige Schöpfung
- (who)
-
Bobeica, Elena
Ciccarelli, Matteo
Vansteenkiste, Isabel
- Event
-
Veröffentlichung
- (who)
-
European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2021
- DOI
-
doi:10.2866/32827
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Bobeica, Elena
- Ciccarelli, Matteo
- Vansteenkiste, Isabel
- European Central Bank (ECB)
Time of origin
- 2021
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