We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more...

We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price...

Traditionally, models of economic decision-making assume that individuals are rational and emotionless. This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: the scarcity of nominal...

This paper examines the behaviour of individual producer prices in the United Kingdom, and uncovers a number of stylised facts about pricing behaviour. First, on average 26% of producer prices change each month, although there is considerable heterogeneity between sectors and price changes occur...

This paper examines the behaviour of individual consumer prices in the United Kingdom, and uncovers a number of stylised facts about pricing behaviour. First, on average 19% of prices change each month, although this falls to 15% if sales are excluded. Second, the probability of price changes is...

Market-based measures of inflation expectations can be derived either from the difference between yields on nominal and inflation-linked government bonds or from inflation swap rates. These measures are important indicators of the outlook for inflation and are monitored regularly by the United...

This paper examines the behaviour of supermarket prices in the United Kingdom, using weekly scanner data supplied by Nielsen. A number of stylised facts about pricing behaviour are uncovered. First, prices change very frequently in supermarkets, with 40% of prices changing each week, and even...

This paper uses a ‘trendy' approach to understand UK inflation dynamics. It focuses on the time series to isolate a low-frequency and slow-moving component of inflation (the trend) from deviations around this trend. We find that this slow-moving trend explains a substantial share of UK...

We develop a model that can explain the evolution of trend inflation in the United States in the three decades before the Great Recession as a function of the reduction in uncertainty about the monetary policy maker's behaviour. The model features ambiguity-averse agents and ambiguity regarding...

The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of U.S. employers, and we develop novel...