This paper replicates and extends the analysis of Blanchard and Bernanke (2023), who investigated the drivers of U.S. pandemic-era inflation by estimating a dynamic model of prices, wages, and both short- and long-run inflation expectations. Using the authors’ replication package, the first objective is to confirm the robustness of their main results up to the second quarter of 2023. The second is to extend the dataset through the second quarter of 2025, incorporating updated information on wages, prices, expectations, and shortages. As in Blanchard and Bernanke, the estimated model is used to analyze both the direct and indirect effects of product- and labor-market shocks on prices and nominal wages. Consistent with their findings, the surge in inflation from 2021 was largely driven by price shocks relative to wages, including sharp increases in commodity prices and sector-specific spikes, reflecting strong aggregate demand on the one hand and supply constraints on the other. A key result concerns the more persistent impact of overheated labor markets on nominal wage growth and inflation compared to the transitory effects of product-market shocks. Extending the analysis through 2025 shows that while goods-market shocks largely faded after 2022, labor market tightness and wage dynamics remained important drivers of inflation. These results underscore both the robustness of the original framework and its relevance for understanding the subsequent disinflation period.
Oksana Bardhi (2026) studied this question.