What the study found
The comprehensive Post Keynesian inflation model was not robust for the United States from 2002 to 2024. The paper also found that, after adding control variables for energy costs and imports, the negative relationship between unit labor costs and inflation in the updated model was not robust.
Why the authors say this matters
The authors present this as a reassessment of the continued relevance of a comprehensive Post Keynesian model of inflation for the United States. The study suggests that the changing behavior of the model’s coefficients over 2002 to 2024 may help explain why the wage-cost markup model and the pass through of wage growth to broader inflation measures are less strong in this period.
What the researchers tested
The researcher used quarterly U.S. data from 2002 to 2024, including the inflation period after the onset of the COVID-19 pandemic. The analysis used a reduced form equation combining an aggregate demand–augmented wage-cost markup equation and a wage growth equation, and it tested robustness with different measures of labor market slack, wages, and inflation.
What worked and what didn't
The comprehensive model did not remain robust when alternative measures for wages, unemployment, and inflation were used. The updated model showed a negative relationship between unit labor costs and inflation, but that relationship did not hold once control variables for energy costs and imports were included. After Prais–Winsten estimation, which adjusts for persistent serial correlation, the revised model matched the sign pattern of the original Atesoglu wage-cost markup equation; however, the unit labor costs coefficient was positive and not statistically significant.
What to keep in mind
The abstract does not describe detailed limitations beyond the lack of robustness in the tested model. The summary is limited to the U.S. and to quarterly data from 2002 to 2024.
Key points
- The comprehensive Post Keynesian inflation model was not robust for U.S. data from 2002 to 2024.
- Adding energy-cost and import controls removed the robustness of the negative unit labor cost–inflation relationship.
- Prais–Winsten estimation produced a revised model with the original sign pattern, but the unit labor costs coefficient was not statistically significant.
- The analysis used quarterly U.S. data, including the post-COVID-19 inflation period.
- The model was tested with alternative measures of labor market slack, wages, and inflation.
Disclosure
- Research title:
- US inflation model was not robust from 2002 to 2024
- Authors:
- Christopher R. Herdelin
- Institutions:
- Saint Peter's University
- Publication date:
- 2026-03-09
- OpenAlex record:
- View
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