This podcast episode delves into the complexities of the post-COVID inflation surge. By analyzing the news articles and expert opinions, we attempt to unpack whether inflation was a transitory or a permanent phenomenon, focusing on the US, UK, Japan, and Europe.

What we are referencing in our conversation:

0:24 - To look at monthly inflation data of the countries we will be discussing, check this spreadsheet which has compiled statistics from each respective Central Bank: [2]

0:30 - The video by Dr. Schasfoort: [5]

1:04 - An article which further explores the definition of ‘permanent inflation’: [20]

1:29 - Further explanations on how monetary policy impacts inflation expectation: [21]

1:36 - An article which further explores the definition of ‘transitory inflation’: [15] + inflation expectations [21]

2:08 - An European Central Bank report showing how the majority of inflation in the EU and USA were supply-driven: [10]

2:24 - An article by Larry Summers on how the post-COVID inflation surge is permanent due to mishandling of economic policy: [4]

2:40 - For further reading on how fiscal policy could have impacted inflation: [22]

3:00 - Article on Christine Lagarde’s recent comments on permanent inflation: [3]

3:17 - To read more about how the Phillips Curve and Inflation Expectation interact with one another: [21]

3:24 - Christine Lagarde’s initial comments: [24]

3:31 - Joseph Stiglitz on transitory inflation: [23]

3:55 - Barsky & Kilian’s paper which examines previous oil shocks to examine why inflation rates were so high in the 1970s and 80s in the Western World: [8]

4:37 - See the historical interest rate data for the United States here: [25]

4:45 - See the different types of Government support programmes in OECD countries here: [26]

6:00 - A graphical representation of how inflation in the USA and EU is subsiding: [2]

6:20 - Analysis based on report published by the European Central Bank on inflation dynamics in the EU and the USA: [1]

7:10 - See how Japan’s acute decline in working-age population compares to other developed economies: [27]

7:25 - A Japanese newspaper that focuses on the Economy recently discusses how Trade Unions are increasing their expected wage increases given the labour shortage: [9]

7:39 - A report with further analysis into how Japan’s export industry has become less competitive with the population trends and currency dynamics: [28]

8:18 - Only mentioned implicitly, but we recommend this report by the Federal Reserve to see the role of markups in driving inflation: [29]

9:02 - Article on EU exodus from UK: [30]

9:22 - Article on the British Currency Crisis in 2022: [31]

9:43 - A brief analysis by Bloomberg on how decoupling following Brexit has disproportionately affected the UK economy: [11]

10:36 - Academic paper examining the delay between monetary policy implementation and impact: [32]

11:19 - Article noting the unprecedentedly aggressive policy tightening done by Central Banks: [33]

12:25 - Research institute analyses the impact of fiscal responses to the pandemic and how it resulted in structural changes in the global economy: [17]

12:37 - The IMF’s analysis on how external events such as Russia’s invasion of Ukraine contributed to inflation: [6]

13:52 - World Bank article on the supply disruption and subsequent inflation in Pakistan following the 2022 floods: [34]

14:06 - United Nations highlights the vulnerability of supply from increasing extreme weather events: [35]

15:52 - Emerging trends of deglobalisation and militarisation are highlighted in this IMF report: [19]

Further recommended readings:

[13]: A further analysis of whether Quantitative Easing, a particularly controversial tool for monetary expansion which was widely used for COVID-era stimulus, contributed to inflation or not.

[14]: A Bank of Japan report on what Quantitative Easing as a tool is used to address in the Economy (Note: compare it to the state of the global economy in 2020 - is it applicable?)

[18]: An assessment of the impact of fiscal policy on the Post-COVID inflation surge

References

[1]: Höflmayr, M. (2022). Inflation explained: What lies behind and what is ahead?

[2]: Historical inflation data for the countries of interest, 1971-2023 (All sources and economic data are aggregated in this spreadsheet)

[3]: Koranyi, B. & Canepa, F. (2023, June 27). ECB's Lagarde sees no rate peak call near-term. Reuters.

[4]: Summers, L. (2021, May 20). Larry Summers Worried About Inflation. Harvard Kennedy School

[5]: Schasfoort, J. (2023, September 30). Why Inflation is Coming Down So Fast. Www.youtube.com.

[6]: Binici, M., Centorrino, S., Cevik, S., & Gwon, G. (2022). Here comes the change: The role of global and domestic factors in post-pandemic inflation in Europe. IMF Working Papers, 2022(241)

[7]: Martinez, L. R. (2017). How Much Should We Trust the Dictator’s GDP Estimates? SSRN Electronic Journal

[8]: Barsky, R. B., & Kilian, L. (2001). Do We Really Know That Oil Caused the Great Stagflation? A Monetary Alternative. NBER Macroeconomics Annual, 16, 137–183.

[9]: 連合、賃上げ目標「5%以上」　24年春季交渉「5%程度」から変更 / Japan’s National Trade Union changes its target wage growth from “Around 5%” to “More than 5%” (2023, October 18)

[10]: Koester, G., Gonçalves, E., Gomez-Salvador, R., Doleschel, J., Andersson, M., Pardo, B. G., & Lebastard, L. (2023). Inflation developments in the euro area and the United States. European Central Bank.

[11]: Rees, T. (2023, June 5). Why Is UK Inflation so High and When Will It Fall? Bloomberg.com; Bloomberg.

[12]: Wessel, D., & Milstein, E. (2021, December 17). What did the Fed do in response to the COVID-19 crisis? Brookings.

[13]: Armstrong, R. (2022, July 19). Did QE cause inflation? @FinancialTimes; Financial Times.

[14]: Bank of Japan. (2001). New Procedures for Money Market Operations and Monetary Easing: Bank of Japan. Archive.org.

[15]: Calhoun, G. (2023, March 6). What Is 'Transitory Inflation'? The Facts. Forbes.

[16]: Business Insider. (2023, December 13). Inflation Is Permanent and You'll Never Regain Your Lost Purchasing Power, Says a Wall Street Guru.

[17]: CEPR. (2022, March 1). Demand-supply imbalance during the COVID-19 pandemic: The role of fiscal policy. VoxEU.

[18]: Dao, M. C., Dizioli, A., Gourinchas, P. -O., Jackson, C., & Leigh, D. (2023). Unconventional Fiscal Policy in Times of High Inflation. Paper presented at the European Central Bank Forum on Central Banking, Sintra, Portugal, June 25–28.

[19]: International Monetary Fund. (2023). World Economic Outlook: Navigating Global Divergences. Washington, DC. (Chapter 2)

[20]: MacKinnon, J. (2022, February 11). Inflation is back - is it transitory or will it last? Financial Pipeline.

[21]: Adrian, T. (2023, May 15). The Role of Inflation Expectations in Monetary Policy. IMF.

[22]: Santacreu, A., Young, H., & de Soyres, F. (2022, March 1). Demand–supply imbalance during the Covid-19 pandemic: The role of fiscal policy. CEPR.

[23]: Stiglitz, J. E. (2021, June 24). US Inflation: A Red Herring. Project Syndicate.

[24]: Schneeweiss, Z. (2021, October 16). ECB’s Lagarde Says Inflation Spike Is “Largely Transitory.” Bloomberg.com; Bloomberg.

[25]: Trading Economics. (2023). United States Fed Funds Interest Rate. Tradingeconomics.com.

[26]: OECD. (2020). Government support and the COVID-19 pandemic. OECD Policy Responses to Coronavirus (Covid-19).

[27]: OECD. (2023). Demography - Working age population - OECD Data. OECD.

[28]: Makita, T. (2022). Restoring Japan’s Economic Competitiveness -Regeneration and adaptation to globalization and digitalization is essential. In Japan Research Institute.

[29]: Glover, A., Mustre-del-Rio, J., & von Ende-Becker, A. (2023, January 12). How Much Have Record Corporate Profits Contributed to Recent Inflation? Kansascityfed.org.

[30]: Bounds, A. (2021). Financial Times. FinancialTimes.

[31]: Tajitsu, N. (2022, December 9). British Pound (GBP/USD) Went on a Wild Ride Close to Dollar Parity in 2022. Bloomberg.com; Bloomberg.

[32]: Tomáš Havránek, & Marek Rusnák. (2012). Transmission Lags of Monetary Policy: A Meta-Analysis. RePEc: Research Papers in Economics, 9(4).

[33]: Aldrick, P. (2022, January 27). Fed Kicks Off Most Aggressive Global Tightening in Decades. Bloomberg.com; Bloomberg.

[34]: World Bank Group. (2022, October 6). World Bank: Pakistan’s Economy Slows Down While Inflation Rises Amid Catastrophic Floods. World Bank; World Bank Group.

[35]:United Nations. (2023, July 14). Extreme weather highlights need for greater climate action. UN News.

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