Last year, Ben Bernanke and Olivier Blanchard proposed and estimated a model of the inflation process, which they used to analyze U.S. inflation since 2019. In a joint research effort, ten central banks have subsequently used the model to study inflation in their own economies.
Olivier Blanchard will present the results of this joint project, "An Analysis of Pandemic-Era Inflation in 11 Economies" (Bernanke-Blanchard, 2024).
Pierre Aldama, Hervé Le Bihan, and Claire Le Gall, who participated in the joint project, will present an analysis of inflation in France based on the BB model: "What Caused the Post-Pandemic Inflation? Replicating Bernanke and Blanchard (2023) on French Data."
Main Takeaways:
1. In all countries, the inflation burst was primarily the result of a series of supply disruptions and increases in the relative price of energy and food. In sharp contrast to the 1970s, this did not trigger a wage-price spiral, and the inflationary effects of each of these price shocks were not persistent. This was largely due to a strong anchoring of inflation expectations, likely reflecting increased credibility of central banks’ inflation targets.
2. As the effects of supply shocks have subsided, tighter labor markets, and the resulting rises in nominal wages, have become relatively more important sources of the remaining inflation in many countries, including France. What happens in labor markets will largely determine the cost of the “last mile” to cover before reaching the inflation target.
The presentations will be discussed by Benoit Mojon (BIS).
