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Boranova, Vizhdan, Raju Huidrom, Sylwia Nowak, Petia Topalova, Volodymyr Tulin & Richard Varghese (2021): Wage growth and inflation in Europe: a puzzle? In: Oxford economic papers, Jg. 73, H. 4, S. 1427-1453. DOI:10.1093/oep/gpab051

Abstract

"In many European countries, prior to the pandemic, wages rose faster than productivity, yet consumer price pressures remained subdued. This is puzzling as theory suggests that inflation would pick up with a rise in wage growth that exceeds productivity growth. To shed light on this puzzle, we analyze the transmission of wage shocks to core inflation for a sample of 27 European countries over the period 1995Q1–2019Q1. More importantly, we assess how the transmission depends on a set of factors. We find that historically wage growth has led to higher inflation but the impact has weakened since the global financial crisis. Our analysis shows that the passthrough from wage growth to inflation is significantly lower in periods of subdued inflation and inflation expectations, greater competitive pressures, and robust corporate profitability." (Author's abstract, IAB-Doku) ((en))

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Bundick, Brent & Nicolas Petrosky-Nadeau (2021): From Deviations to Shortfalls: The Effects of the FOMC's New Employment Objective. (Working papers series / Federal Reserve Bank of San Francisco 2021-18), San Francisco, Calif., 36 S.

Abstract

"The Federal Open Market Committee (FOMC) recently revised its interpretation of its maximum employment mandate. In this paper, we analyze the possible effects of this policy change using a theoretical model with frictional labor markets and nominal rigidities. A monetary policy which stabilizes “shortfalls” rather than “deviations” of employment from its maximum level leads to higher inflation and more hiring at all times due to expectations of more accommodative future policy. Thus, offsetting only shortfalls of employment results in higher nominal policy rates on average which provide more policy space and better outcomes during a zero lower bound episode. Our model suggests that the FOMC's reinterpretation of its employment mandate could alter the business-cycle and longer-run properties of the economy and result in a steeper reduced-form Phillips curve." (Author's abstract, IAB-Doku) ((en))

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Chu, Angus C., Guido Cozzi, Haichao Fan & Yuichi Furukawa (2021): Inflation, Unemployment, and Economic Growth in a Schumpeterian Economy. In: The Scandinavian Journal of Economics, Jg. 123, H. 3, S. 874-909. DOI:10.1111/sjoe.12416

Abstract

"This study explores the long-run relationship between inflation and unemployment in a monetary Schumpeterian growth model with matching frictions in the labor market and cash-in-advance (CIA) constraints on consumption and R&D investment. Under the CIA constraint on R&D, higher inflation that raises the opportunity cost of cash holdings leads to a decrease in innovation and economic growth, which in turn decreases labor-market tightness and increases unemployment. Under the CIA constraint on consumption, higher inflation instead decreases unemployment in addition to stifling innovation and economic growth. Therefore, the two CIA constraints have drastically different implications on the long-run relationship between inflation and unemployment. This theoretical result is consistent with our empirical finding and provides a plausible explanation (via the relative magnitude of the two CIA constraints) for the mixed empirical results on the relationship between inflation and unemployment in the literature. Finally, we also calibrate our model to aggregate data in the US and Eurozone to explore quantitative implications on the relationship between inflation and unemployment. This article is protected by copyright. All rights reserved." (Author's abstract, IAB-Doku, Published by arrangement with John Wiley & Sons) ((en))

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Conrad, Christian, Zeno Enders & Alexander Glas (2021): The role of information and experience for households' inflation expectations. (The Rimini Centre for Economic Analysis. Working Papers 2021,4), Rimini, 28 S.

Abstract

"Based on a new survey of German households, we investigate the role that information channels and lifetime experience play in households' inflation expectations. We show that the types of information channels that households use to inform themselves about monetary policy are closely related to their socioeconomic characteristics. These information channels, in turn, have a major influence on the level of perceived past and expected future inflation, as well as on the uncertainty thereof. The expected future change in inflation and the unemployment rate, however, is strongly influenced by individual experience of these variables. Similarly, the expected response of inflation to a change in the interest rate is also shaped by experience. We propose the interpretation that households obtain inflation numbers from the media, but their 'economic model' is shaped by experience." (Author's abstract, IAB-Doku) ((en))

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Iwasaki, Yuto, Ichiro Muto & Mototsugu Shintani (2021): Missing wage inflation? Estimating the natural rate of unemployment in a nonlinear DSGE model. In: European Economic Review, Jg. 132. DOI:10.1016/j.euroecorev.2020.103626

Abstract

"During the recovery from the global financial crisis, most advanced economies have experienced a surprisingly weak response of wage inflation to the decline in unemployment. In this study, we investigate whether downward wage rigidity (DWR) is the source of the flattening wage Phillips curve and the lack of wage inflation in the four advanced economies: Japan, the euro area, the UK and the US. We estimate a nonlinear New Keynesian model with asymmetric wage adjustment costs and the natural rate of unemployment. Wage adjustment costs are found to be highly asymmetric in Japan, the euro area and the UK, but not in the US. The L-shaped wage Phillips curves between wage inflation and the unemployment gap clearly emerge in these three economies. Our policy simulations present a possibility that the missing wage inflation is not a permanent phenomenon and wage inflation is likely to reappear with further improvement in the labor market. Our analysis shows the usefulness of incorporating DWR into models for understanding the background of missing wage inflation and obtaining monetary policy implications." (Author's abstract, IAB-Doku, © 2021 Elsevier) ((en))

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Martellini, Paolo, Guido Menzio & Ludo Visschers (2021): Revisiting the hypothesis of high discounts and high unemployment. In: The Economic Journal, Jg. 131, H. 637, S. 2203-2232. DOI:10.1093/ej/ueaa138

Abstract

"We revisit the hypothesis that cyclical fluctuations in unemployment are caused by shocks to the discount rate. We use a simple but rich search-theoretic model of the labour market in which the UE, EU and EE rates are all endogenous. Analytically, we show that an increase in the discount rate lowers the UE rate and, under some natural conditions, it lowers the EU rate. Quantitatively, we show that an increase in the discount rate from 4% to 10% generates a 3.5% decline in the UE rate and a 6% decline in the EU rate. These findings are at odds with the actual behaviour of the US labour market over the business cycle, which features a negative comovement between the UE and EU rates." (Author's abstract, IAB-Doku) ((en))

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Möhrle, Sascha & Timo Wollmershäuser (2021): Zu den Verteilungseffekten der derzeit hohen Inflationsraten. In: ifo Schnelldienst digital, Jg. 2, H. 16, S. 1-6.

Abstract

"Die Inflationsrate in Deutschland lag im Oktober 2021 mit 4,5% so hoch wie seit Anfang der 1990er Jahre nicht mehr. Häufig wird argumentiert, dass hohe Preissteigerungen neben einem allgemeinen Kaufkraftverlust auch zu Verteilungseffekten führen, weil untere Einkommensgruppen am stärksten unter steigenden Lebensmittel- und Energiepreisen. Zumindest derzeit resultieren solche Verteilungseffekte nicht aus unterschiedlichen Anstiegen der Lebenshaltungskosten einzelner Einkommensgruppen. Vielmehr verteuern sich die Warenkörbe der ärmeren Haushalte spätestens seit Mitte des Jahres 2021 deutlich langsamer als die der reicheren Haushalte." (Autorenreferat, IAB-Doku)

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Schaefer, Daniel & Carl Singleton (2021): The Extent of Downward Nominal Wage Rigidity: New Evidence from Payroll Data. (Discussion papers / University of Reading, Department of Economics 2021-22), Reading, 57 S.

Abstract

"Low inflation has forced the topic of downward nominal wage rigidity (DNWR) back to the centre stage of macroeconomics. We use over a decade of representative payroll data from Great Britain to document novel facts about wage adjustments. We find that basic wages drive the cyclicality of marginal labour costs, which makes them the most relevant wage measure for macroeconomic models that incorporate wage rigidity. Basic wages show substantially more evidence of downward rigidity than previously documented. Every fifth hourly-paid and every sixth salaried employee normally sees no basic wage change from year-to-year, and very few experience cuts. Wage freezes were more common in the Great Recession and are far more likely in smaller firms. We also find evidence that employers compress wage growth when inflation is low, indicating that DNWR constrains wage setting. Further, we show that the wages of new hires and incumbent employees respond equally to the business cycle. These results all point to the importance of including DNWR in macroeconomic and monetary policy models, and our simulations demonstrate that the empirical extent of DNWR can cause considerable long-run output losses." (Author's abstract, IAB-Doku) ((en))

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Tödter, Karl-Heinz & Gerhard Ziebarth (2021): Lifetime Cost of Living and Effective Prices: Theory and Evidence for Germany. In: Jahrbücher für Nationalökonomie und Statistik, Jg. 241, H. 1, S. 29-69. DOI:10.1515/jbnst-2019-0022

Abstract

"We develop and analyze an intertemporal cost of living index (ICOLI), also referred to as lifetime cost of living or cost of life index. The ICOLI is a geometric weighted average of effective prices, derived from constrained consumer utility maximization. Effective prices are both, money valued marginal utilities of the final unit consumed, and present values of prices for future consumption. Using the concept of duration, we derive analytical elasticities of the ICOLI with respect to consumer prices and interest rates and show their impact on lifetime welfare of consumers. We also provide empirical evidence for Germany, compute an ex post time series of the ICOLI, and gauge the welfare effects of low interest rate scenarios. We find that the financial repression policy of the ECB since 2010 contributed to substantial losses in the purchasing power of money and led to lasting welfare losses for consumers in Germany, in particular for the cohorts of young consumers. The ICOLI complements conventional price and inflation statistics and could serve as a valuable information tool for monetary policy." (Author's abstract, IAB-Doku, © De Gruyter) ((en))

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Weber, Enzo & Bert Losse (2021): „Die Löhne dürften in vielen Branchen nach oben gehen“. Interview. In: Wirtschaftswoche H. 09.07.2021, o. Sz., 2021-07-09.

Abstract

"Für den deutschen Arbeitsmarkt post-Corona sagt Arbeitsmarkt-Ökonom Enzo Weber gravierende Veränderungen voraus. Passend zum neuen Zwei-Prozent-Ziel der EZB erwartet er höhere Lohnabschlüsse dank steigender Inflation." (Autorenreferat, IAB-Doku)

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OECD (2021): OECD Economic Outlook, December 2021. Volume 2021 Issue 2 : Preliminary version. (OECD economic outlook 110), Paris, 222 S. DOI:10.1787/66c5ac2c-en

Abstract

"The global recovery from the COVID‑19 pandemic is uneven and becoming imbalanced. The OECD Economic Outlook, Volume 2021 Issue 2, highlights the continued benefits of vaccinations and strong policy support for the global economy, but also points to the risks and policy challenges arising from supply constraints and rising inflation pressures. This issue includes a general assessment of the macroeconomic situation, and a chapter summarising developments and providing projections for each individual country. Coverage is provided for all OECD members as well as for selected partner economies." (Author's abstract, IAB-Doku) ((en))

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OECD (2021): OECD Economic Outlook, Interim Report September 2021. Keeping the Recovery on Track. (OECD economic outlook Interim report September 2021), Paris, 18 S. DOI:10.1787/490d4832-en

Abstract

"The global economic recovery from the COVID-19 pandemic remains strong, yet too uneven. Uneven progress is increasing economic tensions that could undermine the recovery if not well managed by policymakers. Rising commodity and shipping prices and stretched supply chains as economies re-open rapidly are pushing up inflation everywhere but this is expected to be temporary. This Interim Report provides updates for G20 country projections made in the May 2021 issue of the OECD Economic Outlook (Number 109)." (Author's abstract, IAB-Doku) ((en))

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Bundesministerium für Arbeit und Soziales (2021): Jährliche Anpassung der Regelbedarfe an Inflation und Lohnentwicklung. Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten und der Fraktion DIE LINKE (Drucksache 20/109). (Verhandlungen des Deutschen Bundestages. Drucksachen 20/208 (07.12.2021)), 12 S.

Abstract

Den Fragen zum Thema 'Jährliche Anpassung der Regelbedarfe an Inflation und Lohnentwicklung' liegt die Vermutung zugrunde, dass die Absenkung der Mehrwertsteuer 2021 einen Sondereffekt darstellte, der bei der Berechnung nach der Regelbedarfsstufen-Fortschreibungsverordnung einen realen Kaufkraftverlust der Bezieher von Grundsicherung bedeutet. Die Antworten beinhalten Informationen zur Höhe der Fortschreibung der Regelbedarfsstufen und zur Preisentwicklung regelbedarfsrelevanter Güter und Dienstleistungen seit dem Jahr 2006, Projektionen der Inflationsrate für das Jahr 2022 und die Einschätzung der Bundesregierung zu dem massiven Einsatz von Kurzarbeit im Jahr 2020 und einer dadurch bedingten Reduktion der Arbeitszeit vieler Arbeitnehmer

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(2021): Perspektiven der deutschen Wirtschaft für die Jahre 2022 bis 2024. In: Monatsbericht / Deutsche Bundesbank, Jg. 73, H. 12, S. 17-44.

Abstract

"Die deutsche Wirtschaft wird im Projektionszeitraum kräftig wachsen. Zunächst erleidet sie im Winterhalbjahr 2021/22 aber erneut einen Rückschlag. Ausschlaggebend sind verschärfte pandemiebedingte Schutzmaßnahmen. Außerdem halten Lieferengpässe bei Vorprodukten noch an. Ab dem Frühjahr 2022 nimmt die Wirtschaft aber wieder kräftig Fahrt auf. Weil pandemiebedingte Einschränkungen – so die Annahme – dann weitgehend entfallen, legt der private Konsum erheblich zu. Dabei spielt auch eine Rolle, dass ein Teil der während der Pandemie unfreiwillig gebildeten Ersparnisse zusätzlich ausgegeben werden dürfte. Zudem wird davon ausgegangen, dass sich die Lieferengpässe bis Ende 2022 auflösen. Vor allem die Exporte erhalten dann durch Auf- und Nachholeffekte vorübergehend einen starken Schub. Gegen Ende des Projektionszeitraums normalisiert sich das Wachstum des realen Bruttoinlandsprodukts (BIP)." (Textauszug, IAB-Doku)

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Albulescu, Claudiu Tiberiu & Cornel Oros (2020): Inflation, uncertainty, and labour market conditions in the US. In: Applied Economics, Jg. 52, H. 52, S. 5770-5782. DOI:10.1080/00036846.2020.1772458

Abstract

"Recent inflation dynamics in the United States (US) questioned the role of driving forces of inflation in the long run. Although the US recorded one of the longest economic recovery periods and the labour market conditions improved after the Global crisis from 2008 to 2009, the inflation level remained relatively low. Starting from this evidence, the purpose of our paper is to shed light to the influence of inflation uncertainty and labour market conditions on the US inflation level. To this end, we use two bounded measures of inflation uncertainty, and we compare a linear with an asymmetric Autoregressive Distributed Lag (ARDL) framework. We show that both inflation uncertainty and labour market conditions explain the long-run US inflation. However, these results are sensitive to the way the inflation uncertainty is computed. Moreover, contrary to the recent affirmations regarding the vanishing role of labour market in explaining the US inflation in the long run, we show that the labour market influence is stronger in the post-crisis, compared with the pre-crisis period. Therefore, the monetary policymakers cannot make abstraction of labour market developments in anticipating the US inflation level." (Author's abstract, IAB-Doku) ((en))

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Bahloul Zekkari, Kathia & Thomas Seegmuller (2020): Asset bubble and endogenous labor supply: A clarification. In: Economics Letters, Jg. 196. DOI:10.1016/j.econlet.2020.109537

Abstract

"This paper analyzes the link between asset bubbles, endogenous labor and capital. First, we explicitly and theoretically derive the conditions to have a crowding-in effect of the bubble, i.e. higher levels of capital and labor. Second, the utility function we consider shows that this result does not require an arbitrarily high elasticity of intertemporal substitution in consumption." (Author's abstract, IAB-Doku, © 2021 Elsevier) ((en))

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Bassi, Federico (2020): Chronic Excess Capacity and Unemployment Hysteresis in EU Countries. A Structural Approach. (Working paper / Università cattolica del Sacro Cuore, Dipartimento di economia e finanza 91), Milano, 54 S.

Abstract

"We develop a structural method for identifying the unobservable rate of capacity utilization in 14 EU countries, by simultaneously estimating the coefficients of a production function, an investment function, a labor productivity function and an unemployment function. Our results provide evidence of chronic underutilization of productive capacity and hysteresis in unemployment, especially after the 2008' financial crisis. We show that our series of the rate of capacity utilization are significant predictors of capacity accumulation, productivity growth and unemployment rates. Moreover, they predict inflation as efficiently as the DG ECFIN series of capacity utilization and output gaps." (Author's abstract, IAB-Doku) ((en))

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Billi, Roberto M. (2020): Unemployment fluctuations and nominal GDP targeting. In: Economics Letters, Jg. 188. DOI:10.1016/j.econlet.2020.108970

Abstract

"I evaluate the welfare performance of a target for the level of nominal GDP in a New Keynesian model with unemployment, accounting for a zero lower bound (ZLB) constraint on the nominal interest rate. Nominal GDP targeting is compared to employment targeting, a conventional Taylor rule, and the optimal monetary policy with commitment. I find that employment targeting is optimal when supply shocks are the source of fluctuations; however, facing demand shocks and the ZLB constraint, nominal GDP targeting can outperform substantially employment targeting." (Author's abstract, IAB-Doku, © 2020 Elsevier) ((en))

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Brummund, Peter & Michael R. Strain (2020): Does Employment Respond Differently to Minimum Wage Increases in the Presence of Inflation Indexing? In: The Journal of Human Resources, Jg. 55, H. 3, S. 999-1024. DOI:10.3368/jhr.55.2.1216.8404R2

Abstract

"The minimum wage literature focuses heavily on “the” employment elasticity of minimum wage increases. In contrast, this study focuses on heterogeneity in minimum wage policy. Specifically, we study whether minimum wage increases lead to differential employment effects in states where minimum wages are indexed to inflation. We find evidence they do. To the best of our knowledge, this work is the first to empirically study inflation indexing. On balance, our results imply that the immediate disemployment effect of an increase in the minimum wage in a state that indexes its minimum wages to inflation is around three times the magnitude of the disemployment effect associated with a nominal increase in the minimum wage. Our finding is robust across both “canonical” and “county-pair” models, though it does not hold in our most restrictive specification. Examining the timing of the employment response reveals the disemployment effect associated with a change in the minimum wage is concentrated in the first 14 quarters after a state begins indexing minimum wages to inflation." (Author's abstract, IAB-Doku) ((en))

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Byrne, David & Zivile Zekaite (2020): Non-linearity in the wage Phillips curve: Euro area analysis. In: Economics Letters, Jg. 186. DOI:10.1016/j.econlet.2019.07.006

Abstract

This paper examines the sensitivity of wage growth to labour market tightness in the euro area. We show that the euro area wage Phillips curve is convex. When labour market slack is elevated, wage growth does not respond to changing labour market conditions. This finding explains “missing wage growth” as the labour market tightened between 2013 and 2016, and why stronger wage growth has been evident since 2017. (Author's Abstract, IAB-Doku)

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Curran, Michael & Scott J. Dressler (2020): Preferences, inflation, and welfare. In: European Economic Review, Jg. 130. DOI:10.1016/j.euroecorev.2020.103594

Abstract

"This paper systematically examines how degrees of household risk aversion (RA) and elasticity of intertemporal substitution (EIS) impact the welfare costs of inflation in a heterogeneous-agent environment featuring capital and essential money. Empirical evidence suggests that households have degrees of RA and EIS that differ on average from traditional values and display large amounts of dispersion. Capturing these empirical features of preference values in an otherwise standard model leads to welfare enhancements of inflation due to household substitution of money for capital. The analysis also compares the welfare implications for alternative ways to implement monetary policy." (Author's abstract, IAB-Doku, © 2021 Elsevier) ((en))

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Del Negro, Marco, Michele Lenza, Giorgio E. Primiceri & Andrea Tambalotti (2020): What's Up with the Phillips Curve? In: Brookings Papers on Economic Activity H. Spring, S. 301-357.

Abstract

"The business cycle is alive and well, and real variables respond to it more or less as they always did. Witness the Great Recession. Inflation, in contrast, has gone quiescent. This paper studies the sources of this disconnect using vector autoregressions and an estimated dynamic stochastic general equilibrium model. It finds that the disconnect is due primarily to the muted reaction of inflation to cost pressures, regardless of how they are measured—a flat aggregate supply curve. A shift in policy toward more forceful inflation stabilization also appears to have played some role by reducing the impact of demand shocks on the real economy. The evidence rules out stories centered around changes in the structure of the labor market or in how we should measure its tightness." (Author's abstract, IAB-Doku) ((en))

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Eren, Gürer & Alfons Weichenrieder (2020): Pro-rich inflation in Europe: Implications for the measurement of inequality. In: German Economic Review, Jg. 21, H. 1, S. 107-138. DOI:10.1515/ger-2018-0146

Abstract

"This paper studies the distributional consequences of a systematic variation in expenditure shares and prices. Using European Union Household Budget Surveys and Harmonized Index of Consumer Prices data, we construct household-specific price indices and reveal the existence of a pro-rich inflation in Europe. Over the period 2001–15, the consumption bundles of the poorest deciles in 25 European countries have, on average, become 11.2 percentage points more expensive than those of the richest deciles. We find that ignoring the differential inflation across the distribution underestimates the change in the Gini (based on consumption expenditure) by almost up to 0.04 points. Cross-country heterogeneity in this change is large enough to alter the inequality ranking of numerous countries. The average inflation effect we detect is almost as large as the change in the standard Gini measure over the period of interest." (Author's abstract, IAB-Doku, Published by arrangement with De Gruyter) ((en))

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Eser, Fabian, Peter Karadi, Philip R. Lane, Laura Moretti & Chiara Osbat (2020): The Phillips Curve at the ECB. (European Central Bank. Working paper series 2400), Frankfurt am Main, 49 S.

Abstract

"We explain the role of the Phillips Curve in the analysis of the economic outlook and the formulation of monetary policy at the ECB. First, revisiting the structural Phillips Curve, we highlight the challenges in recovering structural parameters from reduced-form estimates and relate the reduced-form Phillips Curve to the (semi-)structural models used at the ECB. Second, we identify the slope of the structural Phillips Curve by exploiting cross-country variation and by using high-frequency monetary policy surprises as instruments. Third, we present reduced-form evidence, focusing on the relation between slack and inflation and the role of inflation expectations. In relation to the recent weakness of inflation, we discuss the role of firm profits in the pass-through from wages to prices and the contribution of external factors. Overall, the available evidence supports the view that the absorption of slack and a firm anchoring of inflation expectations remain central to successful inflation stabilisation." (Author's abstract, IAB-Doku) ((en))

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Farm, Ante (2020): Explaining Inflation and Unemployment. (Swedish Institute for Social Research. Working paper 2020,05), Stockholm, 27 S.

Abstract

"This paper explains inflation and unemployment starting from new baseline models of price formation and labor demand. Inflation is always and everywhere a pricing phenomenon. Unemployment is every year determined as a residual, as people in the labor force without employment. Employment is determined by production and labor productivity, while production is determined by spending (as measured by nominal GDP) at prices set by firms." (Author's abstract, IAB-Doku) ((en))

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Faryna, Oleksandr, Tho Pham, Oleksandr Talavera & Andriy Tsapin (2020): Wage Setting and Unemployment: Evidence from Online Job Vacancy Data. (GLO discussion paper / Global Labor Organization 503), Essen, 49 S.

Abstract

"This paper examines the relationship between labour market conditions and wage dynamics by exploiting a unique dataset of 0.8 million online job vacancies. We find a weak trade-off between aggregated national-level wage inflation and unemployment. This link becomes more evident when wage inflation is disaggregated at sectoral and occupational levels. Using exogenous variations in local market unemployment as the main identification strategy, a negative correlation between vacancy-level wage and unemployment is also established. The correlation magnitude, however, is different across regions and skill segments. Our findings suggest the importance of micro data's unique dimensions in examining wage setting \textendash{} unemployment relationship." (Author's abstract, IAB-Doku) ((en))

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Fuest, Clemens (2020): Wie wir unsere Wirtschaft retten. Der Weg aus der Corona-Krise. Berlin: Aufbau-Verlag, 277 S.

Abstract

"Wie lange reichen die Milliarden aus dem Konjunkturpaket der Bundesregierung? Welche Gefahr droht durch die immensen Schulden? Bleibt die Eurozone stabil? Wird der Sozialstaat es schaffen, neue Ungleichheiten zu bekämpfen? Was wird aus dem Klimaschutz? Und wie nutzen wir die Chancen, die diese Krise auch eröffnet? In seinem grundlegenden Buch weist Clemens Fuest, Präsident des ifo Instituts den Weg aus der Krise." (Verlagsangaben, IAB-Doku)

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Gomis-Porqueras, Pedro, Stella Huangfu & Hongfei Sun (2020): The role of search frictions in the long-run relationships between inflation, unemployment and capital. In: European Economic Review, Jg. 123. DOI:10.1016/j.euroecorev.2020.103396

Abstract

"This paper explores the long-run relationships between inflation, unemployment and capital accumulation by proposing a model with search frictions in both goods and labor markets. This framework allows us to identify a negative extensive margin effect of inflation on the number of firms demanding capital and a positive intensive margin effect of inflation on the capital demanded per firm. The two effects together generate a hump-shaped relationship between long-run inflation and aggregate capital. These results are consistent with our empirical evidence from a cross-section of 76 countries, which suggests a non-monotonic relationship between inflation and investment to GDP ratio in the long run. Our calibrated results are also consistent with empirical findings from the U.S. data on the effect of inflation on capital stock, unemployment and the real interest rates." (Author's abstract, IAB-Doku, © 2020 Elsevier) ((en))

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Hahn, Elke (2020): The wage-price pass-through in the euro area: does the growth regime matter? (European Central Bank. Working paper series 2485), Frankfurt am Main, 41 S. DOI:10.2866/340764

Abstract

"This paper explores whether the transmission mechanism between wages and prices in the euro area is affected by the growth regime. Since the great financial crisis inflation developments have posed major puzzles to economists as inflation declined by less than was widely expected during the past recessions and rose by less during the subsequent recoveries. This paper analyses whether the wage-price pass-through may have contributed to these inflation puzzles. Applying the Threshold VAR model proposed by Alessandri and Mumtaz (2017) to the analysis of the wage-price pass-through, the paper examines whether the transmission mechanim of different types of shocks differs between recessions and expansions. The results point to differences in the wage-price pass-through between growth regimes for demand shocks but not for wage mark-up shocks. They show a much smaller response of prices relative to wages, i.e. a smaller wage-price pass-through, for demand shocks in recessions than in expansions. This is accounted for by a smaller relative response of profit margins. More generally, the results suggest that the slope of the price Phillips curve flattens in recessions on account of the lower wage-price pass-through, while the wage Phillips curve appears to be broadly stable across growth regimes. Overall, the results contribute to solve or diminish the puzzle of the missing disinflation of the past two recessions suggesting that inflation should be expected to recede by less during recessions than indicated by standard linear models." (Author's abstract, IAB-Doku) ((en))

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Landwehr, Jannik J. (2020): The case for a job guarantee policy in Germany: A political-economic analysis of the potential benefits and obstacles. (Working Paper / Berlin Institute for International Political Economy 2020,150), Berlin, 27 S.

Abstract

"As a bottom-up approach, a Job Guarantee policy can tackle the issue of unemployment on the macroeconomic, socioeconomic, and individual level in a unique way and promote the social inclusion of the unemployed. This paper aims at analysing the potential obstacles - namely inflationary pressure and financing - of a Job Guarantee policy implementation in the case of Germany. A Job Guarantee's impact on inflation depends on excess production capacities of economic sectors as well as collective wage bargaining structures. In this regard, this paper concludes that under a correct policy design inflationary pressure is no major obstacle. Strengthening workers' bargaining power in Germany through a Job Guarantee policy could even contribute to reaching the inflation target and prevent deflation. However, deficiencies of the European institutional setup and the analogous restrictive fiscal mantra at European and national level limit the political scope for financing a Job Guarantee policy. Notwithstanding, a small to medium size Job Guarantee programme - comprising up to all currently unemployed willing to work - is politically and legally feasible." (Author's abstract, IAB-Doku) ((en))

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Lepetit, Antoine (2020): Asymmetric unemployment fluctuations and monetary policy trade-offs. In: Review of Economic Dynamics, Jg. 36, S. 29-45. DOI:10.1016/j.red.2019.07.005

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Vlekke, Marente, Martin Mellens & Siem Jan Koopmans (2020): An assessment of the Phillips curve over time: evidence for the United States and the euro area. (CPB discussion paper / CPB Netherlands Bureau for Economic Policy Analysis 416), The Hague, 74 S. DOI:10.34932/9sxf-1876

Abstract

"We assess the stability of the coefficient on the unemployment gap in various linear dynamic Phillips curve models. We allow the coefficient on the unemployment gap and the other variables in our model to be time-varying, so that we can monitor the importance of the Phillips curve over time. We compare the effects of different measures for inflation and inflation expectations on our estimation results. In our analysis, we use state space methods and adopt a practical approach to Bayesian estimation with feasible testing and diagnostic checking procedures. Empirical results are presented for the United States and the five largest euro area economies. Our main conclusion is that in the United States the Phillips curve for headline inflation has remained empirically relevant over the years while there are periods when its impact has been low. For measures of core inflation we find a declining Phillips curve. In the euro area the strength of the relationship differs per country and over time, but has overall been weak and volatile in the past three decades. For both the United States and the euro area countries, we find little evidence of the “anchored expectations"-hypothesis." (Author's abstract, IAB-Doku) ((en))

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Weber, Christoph S. (2020): The unemployment effect of central bank transparency. In: Empirical economics, Jg. 59, H. 6, S. 2947-2975. DOI:10.1007/s00181-019-01741-1

Abstract

"Most central banks have increased their transparency in the recent past. The question is whether higher transparency comes at some cost. Firstly, the article shows in a theoretical model that transparency does not necessarily lead to higher unemployment. Secondly, the paper analyses the main theoretical results of other authors that transparency leads to higher wages and unemployment (volatility). The empirical results show no evidence for these conjectures. In fact, the analyses show that transparency can reduce the detrimental effect that central bank independence has on employment. Furthermore, the estimations confirm that transparency does not lead to higher unemployment volatility." (Author's abstract, IAB-Doku, © Springer-Verlag) ((en))

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Weisfeld, Hans, Irineu E. de Carvalho Filho, Fabio Comelli, Rahul Giri, Klaus-Peter Hellwig, Chengyu Huang, Fei Liu, Sandra V. Lizarazo Ruiz, Alexis Mayer Cirkel & Andrea F. Presbitero (2020): Predicting Macroeconomic and Macrofinancial Stress in Low-Income Countries. (IMF working paper 2020,289), Washington, DC, 63 S.

Abstract

"In recent years, Fund staff has prepared cross-country analyses of macroeconomic vulnerabilities in low-income countries, focusing on the risk of sharp declines in economic growth and of debt distress. We discuss routes to broadening this focus by adding several macroeconomic and macrofinancial vulnerability concepts. The associated early warning systems draw on advances in predictive modeling." (Author's abstract, IAB-Doku) ((en))

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el Herradi, Mehdi, Jakob de Haan & Aurélien Leroy (2020): Inflation and the Income Share of the Rich: Evidence for 12 OECD Countries. (CESifo working paper 8203), München, 31 S.

Abstract

"This paper examines the distributional implications of inflation on top income shares in 12 advanced economies using data over the period 1920-2016. We use Local Projections to analyze how top income shares respond to an inflation shock, and panel regressions in which all variables are defined as five-year averages to examine the impact of inflation on the position of the top-one-percent in the long run. Our findings suggest that inflation reduces the share of national income held by the top one percent. Furthermore, we find that inflation shocks and long-run inflation have similar effects on top income shares." (Author's abstract, IAB-Doku) ((en))

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Álvarez, Luis J. & Mónica Correa-López (2020): Inflation expectations in euro area Phillips curves. In: Economics Letters, Jg. 195. DOI:10.1016/j.econlet.2020.109449

Abstract

"We analyze the information content of alternative inflation expectations measures, including those from consumers, firms, experts and financial markets, in the context of open economy Phillips curves. We adopt a thick modeling approach with rolling regressions and we assess the results of an out-of sample conditional forecasting exercise by means of meta regressions. The information content varies substantially across inflation expectations measures. In particular, we find that those from consumers and firms are better at predicting inflation if compared to those from experts and, especially, those from financial markets." (Author's abstract, IAB-Doku, © 2020 Elsevier) ((en))

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Ball, Laurence & Sandeep Mazumder (2019): A Phillips curve for the euro area. (European Central Bank. Working paper series 2354), Frankfurt am Main, 27 S. DOI:10.2866/364747

Abstract

"This paper asks whether a textbook Phillips curve can explain the behavior of core inflation in the euro area. A critical feature of the analysis is that we measure core inflation with the weighted median of industry inflation rates, which is less volatile than the common measure of inflation excluding food and energy prices. We find that fluctuations in core inflation since the creation of the euro are well explained by three factors: expected inflation (as measured by surveys of forecasters); the output gap (as measured by the OECD); and the pass-through of movements in headline inflation. Our specification resolves the puzzle of a “missing disinflation” after the Great Recession, and it diminishes the puzzle of a “missing inflation” during the recent economic recovery." (Author's abstract, IAB-Doku) ((en))

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Bayrak, Riza & Halim Tatli (2019): The determinants of youth unemployment: A panel data analysis of OECD countries. In: European Journal of Comparative Economics, Jg. 15, H. 2, S. 231-248. DOI:10.25428/1824-2979/201802-231-248

Abstract

"The aim of this study was to determine some of the key factors affecting youth employment from 2000-2015. Youth unemployment rate (YU) was the dependent variable while consumer price index (INF), domestic gross savings (GS), labor productivity (LP) and economic growth rate (GR) were the independent variables. Data from 31 OECD countries were obtained from World Bank (WB) and OECD databases. Panel Data Analysis was used to analyze the data. The results show that growth, inflation, and savings affect youth unemployment negatively while labor productivity affects youth employment positively. It is therefore concluded that growth, inflation, savings and labor productivity are among the key determinants of youth unemployment." (Author's abstract, IAB-Doku) ((en))

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Bobeica, Elena, Matteo Ciccarelli & Isabel Vansteenkiste (2019): The link between labor cost and price inflation in the euro area. (European Central Bank. Working paper series 2235), Frankfurt am Main, 64 S. DOI:10.2866/894414

Abstract

"This paper documents, for the first time in a systematic manner, the link between labor cost and price inflation in the euro area. Using country and sector quarterly data over the period 1985Q1-2018Q1 we find a strong link between labor cost and price inflation in the four major economies of the euro area and across the three main sectors. The dynamic interaction between prices and wages is time-varying and depends on the state of the economy and on the shocks hitting the economy. Our results show that it is more likely that labor costs are passed on to price inflation with demand shocks than with supply shocks. However, the pass-through is systematically lower in periods of low inflation as compared to periods of high inflation. These results confirm that, under circumstances of predominantly demand shocks, labor cost increases will be passed on to prices. Coming from a period of low inflation, however, this pass-through could be moderate at least until inflation stably reaches a sustained path." (Author's abstract, IAB-Doku) ((en))

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Buch, Claudia M. & Regina T. Riphahn (Hrsg.) (2019): Evaluierung von Finanzmarktreformen. Lehren aus den Politikfeldern Arbeitsmarkt, Gesundheit und Familie. (Leopoldina-Forum 01), Halle (Saale), 173 S.

Abstract

"Die Finanzkrise wurde als Immobilien-, Schulden- und Eurokrise in vielen Facetten diskutiert. Sie hat zu hohen Kosten für viele Gesellschaften geführt. Allein in Deutschland betrugen die krisenbedingten Zahlungen zur Stützung der Banken 70 bis 80 Milliarden Euro. Vor diesem Hintergrund ist es wichtig, dass die Wissenschaft verstärkt vertrauenswürdige Informationen und transparente Bewertungen über die Wirkungen der seit der Krise beschlossenen Regulierungen der Finanzmärkte in die öffentliche Meinungsbildung und demokratische Entscheidungsfindung einbringt. In Bezug auf die Wirkung von Regulierungen der Finanzmärkte besteht ein besonderes Transparenz- und Informationsdefizit, wie u.a. der Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung feststellte. Unter der deutschen Präsidentschaft der G20 im vergangenen Jahr wurde daher ein Rahmenwerk beschlossen, mit dem die Reformen der Finanzmärkte evaluiert werden können. Wenn wir davon ausgehen, dass Forschung zu Ursachen und Folgen der Finanzkrise hilfreiches Wissen für die Gesellschaft bereitstellt, müssen wir gerade mit Blick auf die Regulierung der Finanzmärkte fragen, warum wissenschaftliche Evaluierung dort bislang wenig stattfindet und kaum politische Wirkungen erzielt. Beispiele für wissenschaftliche Evaluierung von politischen Interventionen finden sich in der Arbeitsmarkt-, Familien- oder Gesundheitspolitik. Expertinnen und Experten aus diesen Feldern diskutieren in diesem Band, was wir aus diesen Erfahrungen lernen können. Dabei geht es weniger um wissenschaftliche Methoden als um die Frage, wie gute Evaluierungen gelingen können, welche Voraussetzungen dafür im politischen Prozess und der Wissenschaft nötig sind - und wie ein besserer Dialog zwischen beiden Seiten gestaltet werden kann." (Autorenreferat, IAB-Doku)

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Colciago, Andrea, Anna Samarina & Jakob de Haan (2019): Central bank policies and income and wealth inequality. A survey. In: Journal of Economic Surveys, Jg. 33, H. 4, S. 1199-1231. DOI:10.1111/joes.12314

Abstract

"This paper reviews recent research on the relationship between central bank policies and inequality. A new paradigm which integrates sticky-prices, incomplete markets, and heterogeneity among households is emerging, which allows for the joint study of how inequality shapes macroeconomic aggregates and how macroeconomic shocks and policies affect inequality. The new paradigm features multiple distributional channels of monetary policy. Most empirical studies, however, analyze each potential channel of redistribution in isolation. Our review suggests that empirical research on the effects of conventional monetary policy on income and wealth inequality yields mixed findings, although there seems to be a consensus that higher inflation, at least above some threshold, increases inequality. In contrast to common wisdom, conclusions concerning the impact of unconventional monetary policies on inequality are also not clear cut. To better understand policy effects on inequality, future research should focus on the estimation of General Equilibrium models with heterogeneous agents." (Author's abstract, Published by arrangement with John Wiley & Sons) ((en))

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Döpke, Jörg, Ulrich Fritsche & Karsten Müller (2019): Has macroeconomic forecasting changed after the Great Recession? Panel-based evidence on forecast accuracy and forecaster behavior from Germany. In: Journal of macroeconomics, Jg. 62. DOI:10.1016/j.jmacro.2019.103135

Abstract

We analyze the forecast accuracy for the periods before and after the Great Recession using a panel of annual data for 17 growth and inflation forecasts from 14 German institutions. We find only small differences in the quantitative accuracy measures between the two periods. The qualitative measures of forecast accuracy have slightly worsened and forecasters’ behavior has changed after the crisis. Errors in predicting directional change, however, have changed significantly between the two periods under investigation. Tests for the efficiency of the forecasts over the entire sample indicate that growth and inflation forecasts are inefficient. We find a changed correlation between forecast errors of inflation and growth after the crisis, which might hint at a changed forecaster behavior. The estimated loss functions before and after the crisis support this interpretation, suggesting a stronger incentive to avoid overestimation of growth and underestimation of inflation after the crisis. Estimating loss functions for a 10-year rolling window also reveal shifts in the level and direction of loss asymmetry. (Author's Abstract, IAB-Doku)

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Hu, Tai-Wei & Neil Wallace (2019): The Phillips Curve In A Matching Model. In: International Economic Review, Jg. 60, H. 4, S. 1469-1487. DOI:10.1111/iere.12393

Abstract

"Following ideas in Hume, monetary shocks are embedded in the Lagos-Wright model in a new way: There are only nominal shocks accomplished by individual transfers that are sufficiently noisy so that realizations of those transfers do not permit the agents to deduce much about the aggregate realization. Assuming that the distribution of aggregate shocks is almost degenerate, aggregate output increases with the growth rate of the stock of money—our definition of the Phillips curve. This almost degeneracy assumption is far from being necessary; under some mild conditions, the Phillips curve result holds for a large class of distributions." (Author's abstract, IAB-Doku, Published by arrangement with John Wiley & Sons) ((en))

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Martellini, Paolo, Guido Menzio & Ludo Visschers (2019): Revisiting the hypothesis of high discounts and high unemployment. (IZA discussion paper 12441), Bonn, 30 S.

Abstract

"We revisit the hypothesis that labor market fluctuations are driven by shocks to the discount rate. Using a model in which the UE and the EU rates are endogenous, we show that an increase in the discount rate leads to a decline in both the UE and the EU rates. In the data, though, the UE and EU rates move against each other at business cycle frequency. Using a lifecycle model with human capital accumulation on the job, we show that an increase in the discount rate does indeed lead to a decline in the aggregate UE rate and to an increase in the aggregate EU rate. However, the decline in the UE rate is larger for younger workers than for older workers and the EU rate increases only for younger workers. In the data, fluctuations in the UE and EU rates at the business cycle frequency are nearly identical across age groups." (Author's abstract, IAB-Doku) ((en))

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Soric, Petar, Ivana Lolic, Oscar Claveria, Enric Monte & Salvador Torra (2019): Unemployment expectations: A socio-demographic analysis of the effect of news. In: Labour economics, Jg. 60, H. October, S. 64-74. DOI:10.1016/j.labeco.2019.06.002

Abstract

"In this study, we evaluate the effect of news on consumer unemployment expectations for sixteen socio-demographic groups. To this end, we construct an unemployment sentiment indicator and extract news about several economic variables. By means of genetic programming we estimate symbolic regressions that link unemployment rates in the Euro Area to qualitative expectations about a wide range of economic variables. We then use the evolved expressions to compute unemployment expectations for each consumer group. We first assess the out-of-sample forecast accuracy of the evolved indicators, obtaining better forecasts for the leading unemployment sentiment indicator than for the coincident one. Results are similar across the different socio-demographic groups. The best forecast results are obtained for respondents between 30 and 49 years. The group where we observe the bigger differences among categories is the occupation, where the lowest forecast errors are obtained for the unemployed respondents. Next, we link news about inflation, industrial production, and stock markets to unemployment expectations. With this aim we match positive and negative news with consumers' unemployment sentiment using a distributed lag regression model for each news item. We find asymmetries in the responses of consumers' unemployment expectations to economic news: they tend to be stronger in the case of negative news, especially in the case of inflation." (Author's abstract, © 2019 Elsevier) ((en))

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Turner, David, Thomas Chalaux, Yvan Guillemette & Elena Rusticelli (2019): Insights from OECD Phillips curve equations on recent inflation outcomes. (OECD Economics Department working papers 1579), Paris, 39 S. DOI:10.1787/d1e97b18-en

Abstract

"A statistically significant relationship between the unemployment gap and inflation can be found for a clear majority of OECD countries, but the magnitude of the effect is typically weak. A corollary is that the effect of labour market slack on inflation can often be dominated by other shocks, including imported inflation. The current Secretariat Phillips curve specification assumes inflation expectations are anchored at the central bank's target, although some experimentation suggests that alternative proxies for expectations sometimes work better and there is some evidence that persistent under-shooting of inflation has led to some de-anchoring of expectations from the target, especially in the euro area. For most OECD countries, a measure of the global output gap is both statistically significant and strongly preferred to a domestic gap measure in explaining the wedge between headline and core inflation, although domestic gaps are strongly preferred in explaining core inflation. Various forms of non-linearity in the Phillips curve provide possible explanations for recent weak inflation outcomes, but statistical testing provides only limited support for such explanations." (Author's abstract, IAB-Doku) ((en))

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Zhang, Yuanyan Sophia (2019): European wage dynamics and spillovers. (IMF working paper 2019,156), Washington, DC, 29 S.

Abstract

"Wage rises have remained stubbornly low in advanced Europe in recent years, but, at the same time, newer EU members are experiencing rapid wage acceleration. This paper investigates the drivers of this wage divergence. Econometric analysis using error correction models suggests that wage growth responds more quickly to changes in unemployment in the newer EU members than in advanced Europe, where wages are more closely related to inflation and inflation expectations in the short run, implying greater inertia in nominal wage rises in advanced Europe. In the years after the global crisis, this inertia contributed to the build up of a real wage overhang relative to sharply slowing labor productivity, which subsequently dragged on nominal wage rises even as unemployment began to decline. Spillovers of subdued wage growth between euro area countries also weighed on wage rises in advanced Europe." (Author's abstract, IAB-Doku) ((en))

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Alogoskoufis, George (2018): The clash of central bankers with labour market insiders, and the persistence of inflation and unemployment. In: Economica, Jg. 85, H. 337, S. 152-176. DOI:10.1111/ecca.12241

Abstract

"This paper analyses the implications of monetary policy for the dynamic behaviour of inflation, in a 'natural' rate model characterized by endogenous unemployment persistence. We present evidence for the main industrial economies that suggests that inflation displays persistence which is of the same order of magnitude as the persistence of deviations of unemployment from its 'natural' rate. We provide a theoretical explanation of this fact based on a model of the dynamic interactions between central bankers and labour market insiders. The clash in the objectives of central bankers and labour market insiders is what causes both inflation and unemployment to display the same persistence in this model. The analysis suggests that inflation persistence could be addressed in a welfare-improving way, if central banks adopted monetary policy rules that targeted unanticipated changes in unemployment rates instead of deviations of unemployment from its 'natural' rate." (Author's abstract, Published by arrangement with John Wiley & Sons) ((en))

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Bracha, Anat & Mary A. Burke (2018): Wage inflation and informal work. In: Economics Letters, Jg. 171, H. October, S. 159-163. DOI:10.1016/j.econlet.2018.07.033

Abstract

"Despite the low unemployment rate in the United States, wage inflation has remained modest. This paper investigates whether hidden labor market slack in the form of informal 'gig' economy work could help explain this puzzle. Using our Survey of Informal Work Participation for 2015 - 2016 we find that informal labor is negatively associated with wage growth at the census division level, while no such association exists between wage growth and unemployment rates." (Author's abstract, © 2018 Elsevier) ((en))

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Elsby, Michael W. & Gary Solon (2018): How prevalent is downward rigidity in nominal wages? International evidence from payroll records and pay slips. (NBER working paper 25393), Cambrige, Mass., 23 S. DOI:10.3386/w25393

Abstract

"For more than 80 years, many macroeconomic analyses have been premised on the assumption that workers' nominal wage rates cannot be cut. Contrary evidence from household surveys reasonably has been discounted on the ground that the measurement of frequent wage cuts might be an artifact of reporting error. This article summarizes a more recent wave of studies based on more accurate wage data from payroll records and pay slips. By and large, these studies indicate that, except in extreme circumstances (when nominal wage cuts are either legally prohibited or rendered beside the point by very high inflation), nominal wage cuts from one year to the next appear quite common, typically affecting 15-25 percent of job stayers in periods of low inflation." (Author's abstract, IAB-Doku) ((en))