ABSTRACT
We answer the question posed by the title by specifying and estimating a simpledynamic model of prices, wages, and short-run and long-run inflation expectations. Theestimated model allows us to analyze the direct and indirect effects of product-marketand labormarket shocks on prices and nominawages and to guantity tne sources ofUS pandemic-era inflation and wage growth. We find that, contrary to early concernsthat inflation would be spurred by overleated lapor markets most of the inflationsurge that began in 2021 was the result of shocks to prices given wages. These shocksreflecting strong aggregate demand.included sharp increases in commodity prices.and sectoral price spikes, resulting from changes in the level and sectoral compositionof demand together with constraints on sectoral supply. However, although tight labolmarkets have thus far not been the primary driver of inflation, we find that the effectsof overheated labor markets on nominal wage growth and inflation are more persistentthan the effects of product-market shocks. Controlling inflation will thus ultimatelyrequire achieving a better balance between labor demand and labor supply.
Note: This paper was prepared for aconference on the recent inflation held at the HutchinsCenter on Fiscal and Monetary Policy at the Brookings institution on May 23, 2023. Ithas been published as Hutchins Center Working Paper #86 here. The authors thankDavid Reifschneider and Elaine Buckberg for helpful information, and Peter Diamond.Jason Furman, joseph Gagnon, Patrick Honohan, Egor Gornostay, Daniel Leigh; MauriceObstfeld. Lawrence H Summers, Richard Clarida, Angei Ubide, David Vines, and DavidWilcox for discussions Excellent research assistance was provided by James Lee andAthiana Tettaravou, The authors thank the Hutchins Center, the Brookings institution, andthe Peterson institute for international Economics (PlE) for support. This paper has beensubjected to a PllE pre-publication data replicability review.
来源： 彼得森经济研究所
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