We find that inflation did not unanimously decrease savings in the US during the postwar period. This result is puzzling as it contradicts the implications of most monetary general equilibrium models.

In the wake of the steep fall in the national savings due to economic shocks, among them the COVID-19 pandemic macroeconomic consequences, this study examines to what extent inflation explains the variation in the saving behavior in developing countries. Most past empirical studies investigated the role of inflation on savings only in advanced nations. The current study will investigate the effect of inflation on savings culture in Kenya. To determine how inflation explains saving, the study uses the ordinary least squares(OLS) estimation technique. From regression analysis findings, savings are positively related to inflation, economic growth, and interest rate. In contrast, consumption expenditure is negatively related to national savings. From estimation results, in Kenya, high inflation will stimulate further growth in the national savings. This finding is puzzling as it contradicts the implications of most monetary general equilibrium models. Expansionary inflation result implies that the central bank should vitalize inflation, to promote a higher saving culture in Kenya.

Wages have been rising faster than productivity in many European countries for the past few years, yet signs of underlying consumer price pressures remain limited. To shed light on this puzzle, this paper examines the historical link between wage growth and inflation in Europe and factors that influence the strength of the passthrough from labor costs to prices. Historically, wage growth has led to higher inflation, but the impact has weakened since 2009. Empirical analysis suggests that the passthrough from wage growth to inflation is significantly lower in periods of subdued inflation and inflation expectations, greater competitive pressures, and robust corporate profitability. Thus the recent pickup in wage growth is likely to have a more muted impact on inflation than in the past.