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The post-covid inflation episode

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Abstract

The recent inflation episode has been examined in an estimated New Keynesian model. The rise of US price inflation resulted from a combination of price-push shocks (45%), wage-push shocks (24%), expansionary monetary policy shocks (21%) and shocks that reduced the labor force (9%). On the projections of the disinflation path, results indicate that if either prices or wages are further indexed to lagged inflation, wage inflation will be higher and the price disinflation will slow down. Also, a severe tightening of Fed's monetary policy will barely reduce inflation at the cost of higher unemployment.

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  • Idoia Aguirre & Miguel Casares, 2023. "The post-covid inflation episode," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 2301, Departamento de Economía - Universidad Pública de Navarra.
    • Handle: RePEc:nav:ecupna:2301
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