Why has inflation disappeared?

Before asking whether inflation can return, it is important to understand why it has disappeared in OECD countries since the early 1980s. Possible explanations for the disappearance of inflation are: The shift to anti-inflationary monetary policies (inflation targeting); A negative demand shock: the rise in the savings rate relative to the investment rate; A positive supply shock: the weakness of wage increases ( outweighing the weakness of productivity) due to the decline in wage earners’ bargaining power and labour market deregulation. Other factors, on the contrary, should have led to higher inflation: the persistently high level of required return on equity, population ageing. Econometric analysis seems to show that the disappearance of inflation has been due to the decline in wage increases (we calculate the exogenous component of wage increases, which is not due to inflation, unemployment or productivity), and not to any other development. It is therefore labour market changes that are the cause of the disappearance of inflation.