Recession and deflation?

David Blanchflower and Alex Bryson

Review of Keynesian Economics, 2023, vol. 11, issue 2, 214-231

Abstract: Central bankers are raising interest rates on the assumption that wage-push inflation may lead to stagflation. This is not the case. Although unemployment is low, the labour market is not ‘tight.’ On the contrary, we show that what matters for wage growth are the non-employment rate and the under-employment rate. Both are high and act as brakes on wage growth. By lowering already low levels of consumer confidence, higher interest rates are liable to exacerbate workers’ inability to maintain their real wages by reducing labour demand still further. Furthermore, we argue inflationary pressures have been generated by short-term supply side problems, rather than excessive demand in the economy. Under these conditions, just as in the Great Recession, we anticipate deflation in the near future, coupled with rising joblessness and recession.

Keywords: unemployment; non-employment; wages; inflation; labour market (search for similar items in EconPapers)
JEL-codes: E31 E43 J2 J3 J64 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/view/journals/roke/11/2/article-p214.xml (application/pdf)
Restricted Access

Related works:
Working Paper: Recession and Deflation? (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:11:y:2023:i:2:p214-231

Access Statistics for this article

Review of Keynesian Economics is currently edited by Thomas Palley, Matías Vernengo and Esteban Pérez Caldentey

More articles in Review of Keynesian Economics from Edward Elgar Publishing
Bibliographic data for series maintained by Phillip Thompson ().