The persistent degree of underemployment: There is no reflation

We look at Asia (the 15 RCEP countries), the euro zone and the United States. As long as there is underemployment, inflation will be low and fiscal and monetary policies will be expansionary. But the degree of underemployment is not measured by the gap between GDP and GDP at the end of 2019 ( before the COVID crisis ) , but by the gap between GDP and the GDP that would have been without the COVID crisis or by the gap between the participation rate and that which would have been without COVID. This shows that underemployment will persist for a long time, especially in the euro zone. It is likely to persist until at least: The second quarter of 2022 in Asia; The fourth quarter of 2023 in the euro zone; The first quarter of 2023 in the United States. Reflation, which has been the topic of much talk , will not happen in the short term.