Firms’ pricing power was driver of generalised inflation, paper finds
Supply shocks gave firms cover to raise prices without losing sales, authors find
New research explores how localised supply shocks translated into generalised inflation, via household expectations and the pricing power of firms.
In the working paper, Viral Acharya, Matteo Crosignani, Tim Eisert and Christian Eufinger study recent inflation developments in the eurozone.
The authors track how inflation started out local, in sectors that were hardest hit by supply bottlenecks stemming from the Covid-19 pandemic. They say this led to households updating their inflation
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