IDEAS home Printed from https://ideas.repec.org/p/bfr/banfra/967.html
   My bibliography  Save this paper

What caused the post-pandemic inflation? Replicating Bernanke and Blanchard (2023) on French data

Author

Listed:
  • Pierre Aldama
  • Hervé Le Bihan
  • Claire Le Gall

Abstract

We analyse post-pandemic inflation in France using the Bernanke and Blanchard (2023) semi-structural model of wage and price inflation. This model builds on a wage Phillips curve, a mark-up price-setting equation and adaptive equations for short- and long-run inflation expectations. Wage and price inflation as well as inflation expectations are modelled as functions of a labour market slack indicator (the vacancies-to-unemployed ratio), energy and food price shocks, a measure of supply-chain disruptions (“shortages”) and other exogenous factors (trend productivity, Covid lockdowns/re-openings). We estimate the model from the 1990s to 2023Q2 and derive impulse response functions and historical decomposition of endogenous variables during the pandemic-era. As Bernanke and Blanchard (2023) for the US, we find that the main driver of the post-pandemic inflation was the energy price shocks at first, followed by the food price shocks. Labour market conditions initially played a minor role in inflation, although the substantial increase in wage inflation observed between 2021Q4 and 2023Q2 can be attributed predominantly to the tightening of the labour market. Finally, we perform conditional simulations of wage and price inflation based on alternative scenarios for labour market tightness.

Suggested Citation

  • Pierre Aldama & Hervé Le Bihan & Claire Le Gall, 2024. "What caused the post-pandemic inflation? Replicating Bernanke and Blanchard (2023) on French data," Working papers 967, Banque de France.
    • Handle: RePEc:bfr:banfra:967
    as

    Download full text from publisher

    File URL: https://www.banque-france.fr/system/files/2024-10/WP967.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Olivier J. Blanchard & Ben S. Bernanke, 2023. "What Caused the US Pandemic-Era Inflation?," NBER Working Papers 31417, National Bureau of Economic Research, Inc.
    2. Stefano Neri & Fabio Busetti & Cristina Conflitti & Francesco Corsello & Davide Delle Monache & Alex Tagliabracci, 2023. "Energy price shocks and inflation in the euro area," Questioni di Economia e Finanza (Occasional Papers) 792, Bank of Italy, Economic Research and International Relations Area.
    3. Francesco Corsello & Alex Tagliabracci, 2023. "Assessing the pass-through of energy prices to inflation in the euro area," Questioni di Economia e Finanza (Occasional Papers) 745, Bank of Italy, Economic Research and International Relations Area.
    4. Arce, Óscar & Ciccarelli, Matteo & Montes-Galdón, Carlos & Kornprobst, Antoine, 2024. "What caused the euro area post-pandemic inflation?," Occasional Paper Series 343, European Central Bank.
    5. Francesco Corsello & Matteo Gomellini & Dario Pellegrino, 2023. "Inflation and energy price shocks: lessons from the 1970s," Questioni di Economia e Finanza (Occasional Papers) 790, Bank of Italy, Economic Research and International Relations Area.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adolfsen, Jakob Feveile & Ferrari Minesso, Massimo & Mork, Jente Esther & Van Robays, Ine, 2024. "Gas price shocks and euro area inflation," Working Paper Series 2905, European Central Bank.
    2. Ampudia, Miguel & Lombardi, Marco Jacopo & Renault, Théodore, 2024. "The wage-price pass-through across sectors: evidence from the euro area," Working Paper Series 2948, European Central Bank.
    3. Viral V. Acharya & Matteo Crosignani & Tim Eisert & Christian Eufinger, 2023. "How Do Supply Shocks to Inflation Generalize? Evidence from the Pandemic Era in Europe," NBER Working Papers 31790, National Bureau of Economic Research, Inc.
    4. Esangbedo, Moses Olabhele & Taiwo, Blessing Olamide & Abbas, Hawraa H. & Hosseini, Shahab & Sazid, Mohammed & Fissha, Yewuhalashet, 2024. "Enhancing the exploitation of natural resources for green energy: An application of LSTM-based meta-model for aluminum prices forecasting," Resources Policy, Elsevier, vol. 92(C).
    5. Xiwen Bai & Jesús Fernández-Villaverde & Yiliang Li & Francesco Zanetti, 2024. "The Causal Effects of Global Supply Chain Disruptions on Macroeconomic Outcomes: Evidence and Theory," Economics Series Working Papers 1033, University of Oxford, Department of Economics.
    6. Andrew Figura & Christopher J. Waller, 2022. "What does the Beveridge curve tell us about the likelihood of a soft landing?," FEDS Notes 2022-07-29, Board of Governors of the Federal Reserve System (U.S.).
    7. Koji Nakamura & Shogo Nakano & Mitsuhiro Osada & Hiroki Yamamoto, 2024. "What Caused the Pandemic-Era Inflation?: Application of the Bernanke-Blanchard Model to Japan," Bank of Japan Working Paper Series 24-E-1, Bank of Japan.
    8. Yunyun Wang & Tatsushi Oka & Dan Zhu, 2024. "Inflation Target at Risk: A Time-varying Parameter Distributional Regression," Papers 2403.12456, arXiv.org.
    9. Leef H. Dierks, 2023. "Inflation, Monetary Policy and the Sacrifice Ratio:The Case of Southeast Asia," Working Papers wp50, South East Asian Central Banks (SEACEN) Research and Training Centre.
    10. Baumeister, Christiane, 2023. "Pandemic, War, Inflation: Oil Markets at a Crossroads?," CEPR Discussion Papers 18347, C.E.P.R. Discussion Papers.
    11. Cardani, Roberta & Pfeiffer, Philipp & Ratto, Marco & Vogel, Lukas, 2023. "The COVID-19 recession on both sides of the Atlantic: A model-based comparison," European Economic Review, Elsevier, vol. 158(C).
    12. Montes Rojas Gabriel & Dvoskin Ariel & Feldman Germán, 2023. "Exchange-Rate Regime And Sectorial Profitability In A Small Open Economy: A Theoretical And Empirical Analysis Of Argentina (2016-2023)," Asociación Argentina de Economía Política: Working Papers 4673, Asociación Argentina de Economía Política.
    13. Segarra, Ignacio & Atanasova, Christina & Figuerola-Ferretti, Isabel, 2024. "Electricity markets regulations: The financial impact of the global energy crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 93(C).
    14. Mr. Anil Ari & Mr. Carlos Mulas-Granados & Mr. Victor Mylonas & Mr. Lev Ratnovski & Wei Zhao, 2023. "One Hundred Inflation Shocks: Seven Stylized Facts," IMF Working Papers 2023/190, International Monetary Fund.
    15. Leonardo Ciambezi & Mattia Guerini & Mauro Napoletano & Andrea Roventini, 2023. "Accounting for the Multiple Sources of Inflation: an Agent-Based Model Investigation," GREDEG Working Papers 2023-14, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France, revised Jun 2024.
    16. Stephen G. Hall & George S. Tavlas & Yongli Wang & Deborah Gefang, 2024. "Inflation forecasting with rolling windows: An appraisal," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(4), pages 827-851, July.
    17. Lucidi, Francesco Simone & Pisa, Marta Maria & Tancioni, Massimiliano, 2024. "The effects of temperature shocks on energy prices and inflation in the Euro Area," European Economic Review, Elsevier, vol. 166(C).
    18. Ascari, Guido & Grazzini, Jakob & Massaro, Domenico, 2024. "Great Layoff, Great Retirement and Post-pandemic Inflation," CEPR Discussion Papers 19068, C.E.P.R. Discussion Papers.
    19. Martins, Manuel M.F. & Verona, Fabio, 2023. "Inflation dynamics in the frequency domain," Economics Letters, Elsevier, vol. 231(C).
    20. Lutz Kilian & Xiaoqing Zhou, 2023. "Oil Price Shocks and Inflation," Working Papers 2312, Federal Reserve Bank of Dallas.

    More about this item

    Keywords

    Prices; Inflation; Wages; Inflation Expectations; Phillips Curve;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:967. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.