The paper analyzes the causes of Italian inflation in the post-pandemic period by estimating a model developed by Bernanke and Blanchard for the US. Inflation dynamics depend on wages and on developments in energy and food prices; in turn, the evolution of nominal wages is a function of their adjustment to inflation and the cyclical conditions of the labor market.
The model describes in a satisfactory way the dynamics of consumer prices in Italy but not the dynamics of nominal wages, because of some peculiar features of the collective bargaining process in Italy. The rise in inflation was mainly driven by the strong increase in energy and food prices and, to a lesser extent, by problems in the supply chains of intermediate goods. Moreover, the analysis highlights the absence of a wage-price spiral over the period considered.
