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 nominal wage cuts. The positive implication is that efforts to stimulate the economy should not result in rapidly rising inflation even if output gaps are overestimated provided that long-term expectations remain anchored. However, the finding also means that intra-euro area price adjustment is more challenging, which is the focus of this blog entry.
Πηγή: Bruegel