Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245462 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9281
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We provide novel systematic cross-country evidence that the link between domestic labour markets and CPI inflation has weakened considerably in advanced economies during recent decades. The central estimate is that the short-run pass-through from domestic labour cost changes to core CPI inflation decreased from 0.25 in the 1980s to just 0.02 in the 2010s, while the longrun pass-through fell from 0.36 to 0.03, with the estimates in the 2010s no longer significant. We show that the timing of the collapse in the pass-through coincides with a steep increase in import penetration from a group of major manufacturing EMEs around the turn of the millennium, which signals increased competition and market contestability.
Subjects: 
competition
globalisation
import penetration
inflation
labour market
pass-through
wage
JEL: 
E31
E50
F10
F60
J30
Document Type: 
Working Paper
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