JINGZHOUJZ.GITHUB.IO

Using an unified framework with inflation, wage, profit, and import cost, we show that up to 2023Q1 higher consumer prices mostly reflect increases in profits and import costs, but labor costs are picking up. Also, this is not equivalent to rising profitability... Overborrowing in short-term debt is especially severe because the repayment of short-term liabilities is larger than that of long-term liabilities in future constrained states, resulting in greater cost undervaluation of short-term financial obligations. Therefore, tightening of capital controls should tilt toward short maturities during financial crises... Among real exchange rates deflated by various prices (CPI, GDP deflator, unit labor cost), only unit-labor-cost-based one shows significant negative correlation with external balance, and it can be rationalized by price and wage rigidity alongwith intermediate goods trade.