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4 posts on "Gianluca Benigno"
August 4, 2022

Pandemic Wage Pressures

Woman cashier wearing a covid mask and shield checking out groceries for a man wearing a COVID mask who is paying at the counter behind a shield.

The recovery since the onset of the pandemic has been characterized by a tight labor market and rising nominal wage growth. In this post, we look at labor market conditions from a more granular, sectoral point of view focusing on data covering the nine major industries. This breakdown is motivated by the exceptionality of the pandemic episode, the way it has asymmetrically affected sectors of the economy, and by the possibility of exploiting sectoral heterogeneities to understand the drivers of recent labor market dynamics. We document that wage pressures are highest in the sectors with the largest employment shortfall relative to their pre-pandemic trend path, but that other factors explain most of the wage growth differentials. We suggest that one key factor is the extent of physical contact that has had to be compensated for by offering higher wages. One implication of our analysis is that, as COVID-related factors recede, sectoral imbalances could be restored from the supply side as employment recovers back toward the pre-pandemic trend. 

Posted at 7:00 am in Inflation, Labor Market, Pandemic | Permalink
January 28, 2022

The Global Supply Side of Inflationary Pressures

Image of international map over a picture of cargo ships in a port.

U.S. inflation has surged as the economy recovers from the COVID-19 recession. This phenomenon has not been confined to the U.S. economy, as similar inflationary pressures have emerged in other advanced economies albeit not with the same intensity. In this post, we draw from the current international experiences to provide an assessment of the drivers of U.S. inflation. In particular, we exploit the link among different measures of inflation at the country level and a number of global supply side variables to uncover which common cross-country forces have been driving observed inflation. Our main finding is that global supply factors are very strongly associated with recent producer price index (PPI) inflation across countries, as well as with consumer price index (CPI) goods inflation, both historically and during the recent bout of inflation acceleration.

October 2, 2020

Should Emerging Economies Embrace Quantitative Easing during the Pandemic?

Emerging economies are fighting COVID-19 and the economic sudden stop imposed by lockdown policies. Even before COVID-19 took root in emerging economies, however, investors had already started to flee these markets–to a much greater extent than they had at the onset of the 2008 global financial crisis (IMF, 2020; World Bank, 2020). Such sudden stops in capital flows can cause significant drops in economic activity, with recoveries that can take several years to complete (Benigno et al. 2020). Unfortunately, austerity and currency depreciations as enacted during the global financial crisis won’t mitigate this double whammy of capital outflows and policies to cope with the pandemic. We argue that purchases of local currency government bonds could be a viable option for credible emerging market central banks to support macroeconomic policy goals in these circumstances.

May 18, 2020

Modeling the Global Effects of the COVID-19 Sudden Stop in Capital Flows

The COVID-19 outbreak has triggered unusually fast outflows of dollar funding from emerging market economies (EMEs). These outflows are known as “sudden stop” episodes, and they are typically followed by economic contractions. In this post, we assess the macroeconomic effects of the COVID-induced sudden stop of capital flows to EMEs, using our open-economy DSGE model. Unlike existing frameworks, such as the Federal Reserve Board’s SIGMA model, our model features both domestic and international financial constraints, making it well-suited to capture the effects of an outflow of dollar funding. The model predicts output losses in EMEs due in part to the adverse effect of local currency depreciation on private-sector balance sheets with dollar debts. The financial stresses in EMEs, in turn, spill back to the U.S. economy, through both trade and financial channels. The model-predicted output losses are persistent (consistent with previous sudden stop episodes), with financial effects being a significant drag on the recovery. We stress that we are only tracing out the effects of one particular channel (the stop of capital flows and its associated effect on funding costs) and not the totality of COVID-related effects.

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