Blanchflower, David G;
Bryson, Alexander;
(2023)
Recession and Deflation?
Review of Keynesian Economics
, 11
(2)
pp. 214-231.
10.4337/roke.2023.02.06.
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Abstract
Central bankers are raising interest rates on the assumption that wage-push inflation may lead to stagflation. This is not the case. Although unemployment is low, the labour market is not ‘tight.’ On the contrary, we show that what matters for wage growth are the non-employment rate and the under-employment rate. Both are high and act as brakes on wage growth. By lowering already low levels of consumer confidence, higher interest rates are liable to exacerbate workers’ inability to maintain their real wages by reducing labour demand still further. Furthermore, we argue inflationary pressures have been generated by short-term supply side problems, rather than excessive demand in the economy. Under these conditions, just as in the Great Recession, we anticipate deflation in the near future, coupled with rising joblessness and recession.
| Type: | Article |
|---|---|
| Title: | Recession and Deflation? |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.4337/roke.2023.02.06 |
| Publisher version: | https://doi.org/10.4337/roke.2023.02.06 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher's terms and conditions. |
| Keywords: | unemployment; non-employment; wages; inflation; labour market; E31; E43; J2; J3; J64 |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > School of Education UCL > Provost and Vice Provost Offices > School of Education > UCL Institute of Education UCL > Provost and Vice Provost Offices > School of Education > UCL Institute of Education > IOE - Social Research Institute |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10166133 |
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