Template-Type: ReDIF-Paper 1.0
Author-Name: Sophia  Chen
Author-Name-First: Sophia 
Author-Name-Last: Chen
Author-Email: ychen2@imf.org
Author-Workplace-Name: International Monetary Fund
Author-Name: Deniz  Igan
Author-Name-First: Deniz 
Author-Name-Last: Igan
Author-Email: deniz.igan@bis.org
Author-Workplace-Name: Bank for International Settlements and CEPR
Author-Name: Do  Lee
Author-Name-First: Do 
Author-Name-Last: Lee
Author-Email: dql204@nyu.edu
Author-Workplace-Name: New York University
Author-Name: Prachi  Mishra
Author-Name-First: Prachi 
Author-Name-Last: Mishra
Author-Email: prachi.mishra@ashoka.edu.in
Author-Workplace-Name: Ashoka University
Title: Inflation and Labor Markets: A Bottom-Up View
Abstract: U.S. inflation surged in 2021-22 and has since declined, driven largely by a sharp drop in goods inflation, though services inflation remains elevated. This paper zooms into services inflation, using proprietary microdata on wages to examine its relationship with service sector wage growth at the Metropolitan Statistical Area (MSA) level. We estimate the wage-price pass-through with a local projection instrumental variable model that exploits variation in labor market tightness across MSAs. Our findings reveal a positive and significant relationship between wages and price growth, with a lag. This suggests that the effects of tight labor markets are persistent and may influence the pace of progression toward the inflation target.
length: 35
Creation-Date: 20241014
Revision-Date: 
Publication-Status: 
File-URL:/www/wwwashokaeduin_628/public/dp/RePEc/ash/wpaper/paper127_0.pdf
File-Format: Application/pdf 
Number: 127
Keywords: inflation
Keywords: Labor Market Conditions
Keywords: Wages
Handle: RePEc:ash:wpaper:127