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Euro Area Inflation and how Import Prices, Profits, and Wages fit in

IMF Podcasts

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The Effects of Oil Price Shocks on Profitability

A lot of people have noticed that profits were contributing to some degree. In the US and Canada, you get quite a much bigger increase in labor costs earlier on. Back then, labor costs were really what was accounted for in higher prices. And our hypothesis is that a few factors of play here. One is probably less bargaining power for labor these days than back ago. There's also less indexation. So as inflation picks up, wages automatically go up. That's much less prevalent today. And also inflation expectations are much better anchored today. Everybody expects in the medium term inflation to come back,. there wasn't a case back then. so you more easily had these dynamics with color wage price

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