May 21, 2024
The Value Added Tax (VAT) has become the predominant form of indirect taxation across the globe besides being a major source of fiscal revenue...
ICPP Working Paper
U.S. inflation surged in 2021-22 and has since declined, driven largely by a sharp drop in goods inflation, though services inflation remains elevated. This paper zooms into services inflation, using proprietary microdata on wages to examine its relation-ship with service sector wage growth at the Metropolitan Statistical Area (MSA) level. We estimate the wage-price pass-through with a local projection instrumental variable model that exploits variation in labor market tightness across MSAs. Our findings re-veal a positive and significant relationship between wages and price growth, with a lag. This suggests that the effects of tight labor markets are persistent and may influence the pace of progression toward the inflation target.
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The Goods and Services Tax (GST) has been one of the most instrumental economic policies of the past decade...