Firming Up Price Inflation

52 Pages Posted: 4 Oct 2022 Last revised: 7 Nov 2022

See all articles by Philip Bunn

Philip Bunn

Bank of England

Lena Anayi

Bank of England

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Greg Thwaites

University of Nottingham

Ivan Yotzov

Bank of England

Date Written: September 2022

Abstract

We use data from a large panel survey of UK firms to analyze the economic drivers of price setting since the start of the Covid pandemic. Inflation responded asymmetrically to movements in demand. This helps to explain why inflation did not fall much during the negative initial pandemic demand shock. Energy prices and shortages of labor and materials account for most of the rise during the rebound. Inflation rates across firms have become more dispersed and skewed since the start of the pandemic. We find that average price inflation is positively correlated with the dispersion and skewness of the distribution. Finally, we also introduce a novel measure of subjective inflation uncertainty within firms and show how this has increased during the pandemic, continuing to rise in 2022 even as sales uncertainty dropped back.

Suggested Citation

Bunn, Philip and Anayi, Lena and Bloom, Nicholas and Mizen, Paul and Thwaites, Greg and Yotzov, Ivan, Firming Up Price Inflation (September 2022). NBER Working Paper No. w30505, Available at SSRN: https://ssrn.com/abstract=4236467

Philip Bunn (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Lena Anayi

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Nicholas Bloom

Stanford University - Department of Economics ( email )

Landau Economics Building, Room 231
579 Serra Mall
Stanford, CA 94305-6072
United States
650-725-7836 (Phone)

HOME PAGE: http://economics.stanford.edu/faculty/bloom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul Mizen

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5479 (Phone)
+44 115 951 4159 (Fax)

Bank of England

Threadneedle Street
London, EC2R 8AH
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Greg Thwaites

University of Nottingham

Ivan Yotzov

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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