This article explores the relationship between labor costs and price inflation under two conditions. Firstly, with linear assumption and classical techniques. Secondly, without assuming linearity, by a novel non-parametric machine learning method, namely gradient boosting. With quarterly data from 1996 to 2022 for V4 countries, we find linear and non-linear dependency between labor cost and price inflation. However, the magnitude of the connection is country-specific and changes over time. Our findings indicate that a significant linear relationship between considered variables does not lead to the higher predictability power of labor cost in a non- parametric model, which predicts inflation. Even opposed, the Czech Republic, the country with the highest correlation between unit labor cost(ULC) and deflator, shows better prediction in a case when the ULC is not in the set of independent variables. This fact highlights the importance of non-linearity for the inflation model.

Covid-19 and war-induced commodity price fluctuations, and broadening price pressures have led to a surge in inflation in many sub-Saharan Africa (SSA) countries. To adjust to increasing costs, firms have resorted to several measures including shuttering offices, reducing businesses, laying off, and freezing hiring, thus putting at risk job creation and raising concerns of youth unemployment. This paper explores the effects of inflation on private employment growth in SSA using a large firm -level dataset from the World Bank’s Enterprise Surveys. We find a non-linear relationship between inflation and job creation in SSA, with job creation being negatively correlated with inflation rate when the latter is above 14 percent. This finding holds regardless of the sector of activities of firms and the exchange rate regime. In addition, the paper finds some differential effects based on the type of products. An increase in fuel prices tends to be more detrimental to job creation than food prices. The study also provides evidence that the state of implementation of structural reforms matters. The results show that inflation reduces job opportunities mostly in countries with bad or no structural reforms.

While there are many uniquely positive attributes about the US economy, something is fundamentally wrong and here's what it is: economic growth can no longer be counted on to deliver broadly shared prosperity. Remarkably, pundits, politicians, and candidates from both sides of the aisle are constantly citing the disconnect between overall growth and the economic prospects of most households. We hear lots of well-placed angst about the middle-class squeeze, wage stagnation, "sticky" poverty rates that are unresponsive to growth, and the immobility of those on the wrong side of the inequality divide. And yet . . . no one has articulated a thorough, robust agenda designed explicitly to reunite growth and prosperity. Until now. While many books on these issues spend most of their time on diagnosis and little on prescription, Jared Bernstein, former Chief Economist to Vice President Joe Biden and member of President Obama's economics team, intentionally flips that ratio in The Reconnection Agenda: each chapter presents concrete policy solutions to the fundamental disconnect, including those that can get us to full employment, make monetary and fiscal policy work together more effectively, rebalance international trade, promote mobility, and break the "economic shampoo cycle" (bubble, bust, repeat) that has characterized our economy for decades. Bernstein's last chapter explains why, even while powerful economic elites block commonsense solutions, the demand for a reconnection agenda is growing. What's critical is that citizens recognize the difference between a policy set that will actually help and a phony one that will exacerbate the forces that for decades now have been preventing growth from reaching most Americans. If you've ever read an article or heard a radio report about the lack of enough good jobs, the rise of inequality, and/or the economic stressors facing the middle class and the poor-not to mention the endless squabbles of policy makers unable to do anything truly useful about these problems-and wished for a reader-friendly, even occasionally fun (really!) book that takes you through what's gone wrong and how to fix it . . . Then The Reconnection Agenda is for you! Oh . . . and by the way . . . it's also downloadable for free. How's that for a whack at the forces of economic darkness?

Recent empirical work on the Phillips curve has focused on the convexity of the relationship between inflation and unemployement. In this paper we argue that another potentially important source of nonlinearity in the Phillips curve is to be found in asymmetric price adjustment. If prices rise more easily than they fall, then a threshold autoregressive specification seems a natural framework within which to reexamine the Phillips curve. We examine the Australian data used by a recent article on the Phillips curve and show that there are significant asymmetries in inflation, the Phillips curve and in the behavior of unit labor costs.

This paper examines the role of the labor market in the transmission process of adjustment policies in developing countries. It begins by reviewing the recent evidence regarding the functioning of these markets. It then studies the implications of wage inertia, nominal contracts, labor market segmentation, and impediments to labor mobility for stabilization policies. The effect of labor market reforms on economic flexibility and the channels through which labor market imperfections alter the effects of structural adjustment measures are discussed next. The last part of the paper identifies a variety of issues that may require further investigation, such as the link between changes in relative wages and the distributional effects of adjustment policies.

In recent years, the Federal Reserve and central banks worldwide have enjoyed remarkable success in their battle against inflation. The challenge now confronting the Fed and its counterparts is how to proceed in this newly benign economic environment: Should monetary policy seek to maintain a rate of low-level inflation or eliminate inflation altogether in an effort to attain full price stability? In a seminal article published in 1997, Martin Feldstein developed a framework for calculating the gains in economic welfare that might result from a move from a low level of inflation to full price stability. The present volume extends that analysis, focusing on the likely costs and benefits of achieving price stability not only in the United States, but in Germany, Spain, and the United Kingdom as well. The results show that even small changes in already low inflation rates can have a substantial impact on the economic performance of different countries, and that variations in national tax rules can affect the level of gain from disinflation.