Are major advanced economies on the verge of a wage-price spiral?

Frédéric Boissay, Fiorella De Fiore, Deniz Igan, Albert Pierres Tejada and Daniel Rees

No 53, BIS Bulletins from Bank for International Settlements

Abstract: Inflation has returned, reaching levels not seen in decades. Whether inflation enters a persistently higher regime will depend on labour market developments, and on whether a wage-price spiral emerges. To date, evidence for a broad acceleration in wage growth is mixed. Wage growth has picked up significantly in the United States, but remains moderate in most other advanced economies, despite tentative signs of a renewed sensitivity of wages to inflation in some segments of the labour market and a pickup in inflation expectations. But extrapolating behaviour from low-inflation periods is problematic. If inflation remains high, households may ask for higher wages to make up for lost purchasing power and firms may raise prices to protect profit margins. And stubbornly high inflation may lead to institutional changes such as automatic indexation and cost-of-living adjustment clauses.

Pages: 8 pages
Date: 2022-05-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bis.org/publ/bisbull53.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/bisbull53.htm (text/html)

Related works:
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:bis:bisblt:53

Access Statistics for this paper

More papers in BIS Bulletins from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().