IESET.
Hypotheses·monetary·inflation_cost_push_distributional_conflict_eurozone_2021_2024

The 2021-2024 Eurozone inflation episode is best decomposed as a cost-push / distributional-conflict process rather than a demand-pull / monetary-overhang process: profit-margin expansion in energy, food, and tradable-goods sectors accounts for at least 40% of cumulative GDP-deflator growth 2021Q1-2023Q4 per the ECB and IMF unit-labour-cost decomposition framework, wage growth lagged price growth across the entire 2021-2023 window with real wages declining in every Eurozone economy, and the inflation moderation in 2024 is driven by terms-of-trade reversal rather than wage-side moderation.

This pattern is consistent with the Post-Keynesian / heterodox framing of inflation as the outcome of unresolved wage-price-margin distributional conflict, and inconsistent with the monetarist-demand-pull framing that animates standard Phillips-curve policy responses.

PARTIALengine/runs/inflation_cost_push_distributional_conflict_eurozone_2021_2024

PARTIAL — coef=-9733, p=0.804 (above α=0.05); direction inconclusive

confidence cueThe result is useful, but not decisive. Treat it as a clue, not a settled conclusion.

policy briefMixed or noisy

In ordinary language

In plain terms, this asks whether terms of trade shock is actually linked to better or worse income deflator yoy from 2019 to 2024.

plain answer

The evidence is suggestive but not decisive. coef=-9733, p=0.804 (above α=0.05); direction inconclusive

why it matters

This matters because monetary claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 8 country or place units from 2019 to 2024, using a panel fe decomposition design, with fixed effects for country and year.

what was measured
What changed
  • Terms of trade shock
  • Gas import price index
What we checked
  • Income deflator yoy
  • Unit profit contribution to deflator
  • Unit labour cost contribution to deflator
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

No evidence packet has been generated yet.

Results

engine/runs/inflation_cost_push_distributional_conflict_eurozone_2021_2024
1007550250201920222024DEUFRAITAESPNLDBELAUT
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show gdp_deflator_yoy across 8 sampled countries over 2019–2024.
The shapes above are stylised — none of the lines are real data.
Placeholder for inflation_cost_push_distributional_conflict_eurozone_2021_2024. Published chart will be generated from engine/runs/inflation_cost_push_distributional_conflict_eurozone_2021_2024/chart_data.json.

Pre-registration

registration ordering unverified
first-spec commit 4c8ce8e · 2026-07-18T22:11:21Z
run generated · 2026-06-29T17:54:20Z
Run timestamp predates this path's first git-add commit (rebase, rename, or pre-git local run). Spec hash is still the path's first-add commit — not repository HEAD — but ordering is not a clean pre-registration proof.

The 2021-2024 Eurozone inflation episode is best decomposed as a cost-push / distributional-conflict process rather than a demand-pull / monetary-overhang process: profit-margin expansion in energy, food, and tradable-goods sectors accounts for at least 40% of cumulative GDP-deflator growth 2021Q1-2023Q4 per the ECB and IMF unit-labour-cost decomposition framework, wage growth lagged price growth across the entire 2021-2023 window with real wages declining in every Eurozone economy, and the inflation moderation in 2024 is driven by terms-of-trade reversal rather than wage-side moderation. This pattern is consistent with the Post-Keynesian / heterodox framing of inflation as the outcome of unresolved wage-price-margin distributional conflict, and inconsistent with the monetarist-demand-pull framing that animates standard Phillips-curve policy responses.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

The hypothesis is falsified if any of the following hold over 2021Q1-2023Q4 in the Eurozone aggregate or in at least 6 of 8 Eurozone Big-8 economies: (a) unit-profit contribution to GDP-deflator growth is below 25% of cumulative deflator growth, (b) real wages rise rather than fall in any 12-month window during 2021-2023, OR (c) wage growth leads price growth at any quarter during 2021-2023 in the Granger-causality sense at p<0.05. Additionally, falsification if 2024 disinflation is driven >50% by wage-side moderation rather than terms-of-trade reversal in the ECB decomposition.

formal test & threshold
test:      deflator_decomposition_eurozone_panel_2021_2024
threshold: unit_profit_share_of_deflator_growth >= 0.40 AND real_wage_growth_2021_2023 < 0 in EUR aggregate AND >=6/8 country-level

Method

Template
panel_fe_decomposition
Fixed effects
country, year
Clustering
country
Sample
8 countries · 2019 – 2024
Evidence type
associational

Hansen-Toscani-Zhou / Arce-Hahn-Koester decomposition of the GDP-deflator into unit labour cost, unit profit, and unit tax contributions. Panel fixed-effects regression of deflator on terms-of-trade shock, with profit-margin and wage-side decomposition reported separately. Robustness: country-level cointegration test of profit margins vs deflator 2019-2024.

Data

VariableSourceTransform
gdp_deflator_yoy
outcome
eurostat:nama_10_gdptier 1
ecb:MNA.Q.N.U2.W2.S1.S1.B.B1GQ._Z._Z._Z.IX.D.Ntier 1
pct_change_yoy
unit_profit_contribution_to_deflator
outcome
constructed:gross operating surplus per unit of real GDP, growth rate; eurostat nama_10_gdp + nama_10_a64tier 5
pct_yoy_contribution
unit_labour_cost_contribution_to_deflator
outcome
constructed:compensation of employees per unit of real GDP; eurostat nama_10_gdp + namq_10_lp_ulctier 5
pct_yoy_contribution
real_wage_index
outcome
oecd:real_average_wagetier 2
index_real_2019_100
hicp_inflation_yoy
outcome
ecb:ICP.M.U2.N.000000.4.ANRtier 1
pct_change_yoy
terms_of_trade_shock
treatment
eurostat:bop_externaltier 1
ecb:terms_of_trade_indextier 1
pct_yoy
gas_import_price_index
treatment
eurostat:nrg_pctier 1
ecb:energy_commodity_pricestier 1
log_diff
ecb_policy_rate
treatment
ecb:FM.D.U2.EUR.4F.KR.MRR_FR.LEVtier 1
level_pct
output_gap
control
oecd:OutputGaptier 2
level_pct
unemployment_rate
control
ilostat:unemployment_ratetier 2
pct_labour_force
import_price_index
control
eurostat:sts_inppd_qtier 1
pct_yoy

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — inflation_cost_push_distributional_conflict_eurozone_2021_2024

Verdict: PARTIAL — coef=-9733, p=0.804 (above α=0.05); direction inconclusive

Pre-registration

  • Claim: The 2021-2024 Eurozone inflation episode is best decomposed as a cost-push / distributional-conflict process rather than a demand-pull / monetary-overhang process: profit-margin expansion in energy, food, and tradable-goods sectors accounts for at least 40% of cumulative GDP-deflator growth 2021Q1-2023Q4 per the ECB and IMF unit-labour-cost decomposition framework, wage growth lagged price growth across the entire 2021-2023 window with real wages declining in every Eurozone economy, and the inflation moderation in 2024 is driven by terms-of-trade reversal rather than wage-side moderation. This pattern is consistent with the Post-Keynesian / heterodox framing of inflation as the outcome of unresolved wage-price-margin distributional conflict, and inconsistent with the monetarist-demand-pull framing that animates standard Phillips-curve policy responses.
  • Falsification rule: The hypothesis is falsified if any of the following hold over 2021Q1-2023Q4 in the Eurozone aggregate or in at least 6 of 8 Eurozone Big-8 economies: (a) unit-profit contribution to GDP-deflator growth is below 25% of cumulative deflator growth, (b) real wages rise rather than fall in any 12-month window during 2021-2023, OR (c) wage growth leads price growth at any quarter during 2021-2023 in the Granger-causality sense at p<0.05. Additionally, falsification if 2024 disinflation is driven >50% by wage-side moderation rather than terms-of-trade reversal in the ECB decomposition.
  • Falsification test: deflator_decomposition_eurozone_panel_2021_2024

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): -9733
  • Std error: 3.892e+04
  • p-value: 0.804
  • Observations: 48, countries: 8
  • Within R²: 0.655
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • eurostat:nama_10_gdp; ecb:MNA.Q.N.U2.W2.S1.S1.B.B1GQ._Z._Z._Z.IX.D.N → gdp_deflator_yoy (outcome, publisher=eurostat, n=1451)
  • ecb:ICP.M.U2.N.000000.4.ANR → hicp_inflation_yoy (outcome, publisher=ecb, n=29)
  • eurostat:nrg_pc; ecb:energy_commodity_prices → gas_import_price_index (treatment, publisher=eurostat, n=725)
  • oecd:OutputGap → output_gap (controls, publisher=oecd, n=3331)
  • ilostat:unemployment_rate → unemployment_rate (controls, publisher=ilostat, n=10188)
  • eurostat:sts_inppd_q → import_price_index (controls, publisher=eurostat, n=1367)

Variables missing data

  • constructed: gross operating surplus per unit of real GDP, growth rate; eurostat nama_10_gdp + nama_10_a64 (outcome, name=unit_profit_contribution_to_deflator) — vintage not on disk
  • constructed: compensation of employees per unit of real GDP; eurostat nama_10_gdp + namq_10_lp_ulc (outcome, name=unit_labour_cost_contribution_to_deflator) — vintage not on disk
  • oecd:real_average_wage (outcome, name=real_wage_index) — vintage not on disk
  • eurostat:bop_external; ecb:terms_of_trade_index (treatment, name=terms_of_trade_shock) — vintage not on disk
  • ecb:FM.D.U2.EUR.4F.KR.MRR_FR.LEV (treatment, name=ecb_policy_rate) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:54:20+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

Standard mainstream framing of the post-2021 inflation episode emphasises monetary-overhang from prior QE / fiscal transfers; the PK framing reads it as a cost-push shock that fed through to a distributional-conflict spiral mediated by margins rather than wages. Test follows the IMF (Hansen-Toscani-Zhou 2023) and ECB (Arce-Hahn-Koester 2023) decomposition methodology to allocate GDP-deflator growth between unit labour costs, unit profits, and unit taxes. Counters the wage-price-spiral framing on which the ECB rate-hike cycle was partly justified.

Authored framework. Read the transparency note.