Much pain for small gain: difficulty of cost adjustment in the euro area
Vihriälä, Erkki, Wolff, Guntram. IMF’s latest World Economic Outlook discussed reasons for relatively stable inflation following the Great Recession. It noted that large output gaps and high unemployment have resulted in surprisingly little disinflation in advanced countries. This was attributed to more firmly anchored long-term inflation expectations as well as the reluctance of workers to accept […]