Inflationary Inertia as a Result of Unfulfilled Aspirations

Nicolas Burotto
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Nicolas Burotto: Universidad Andres Bello

No inetwp235, Working Papers Series from Institute for New Economic Thinking

Abstract: I develop a discrete-time Keynesian D/Z model in which inflationary inertia arises from distributional conflict between firms and workers. The mechanism centers on aspiration gaps—the divergence between actual real wages and income targets—which, when combined with strong bargaining power, generate persistent inflation even after conventional macroeconomic gaps close. The model shows that equilibrium in real wages does not guarantee distributional balance, and that market mechanisms alone cannot restore stability. This underscores the need for a "social consensus" that moderates aspiration dynamics and defuses conflict-driven inflationary pressures.

Keywords: inflation inertia; distributional conflict; aspiration gaps; effective demand; wage-price dynamics. (search for similar items in EconPapers)
JEL-codes: E12 E25 E31 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2025-06-25
New Economics Papers: this item is included in nep-hme, nep-inv and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:inetwp235

DOI: 10.36687/inetwp235

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