Olivier Blanchard on U.S. Pandemic-Era Inflation

Olivier Blanchard discusses the direct and indirect effects of product-market and labor-market shocks on prices and nominal wages. Professor Blanchard suggests most of the inflation surge that began in 2021 was the result of shocks to prices given wages, including sharp increases in commodity prices and sectoral shortages. However, the effects of overheated labor markets on nominal wage growth and inflation are more persistent than the effects of product-market shocks.

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