Economic recovery can lag behind inflation for years due to a phenomenon called hysteresis
The economic phenomenon known as hysteresis explains why your wallet may still feel light years after a financial crisis ends, as wage growth often fails to keep pace with rapid price increases.
Economic recovery frequently lags behind inflation due to hysteresis, a state where the temporary effects of a price shock persist long after the initial cause has vanished. While inflation in Europe peaked at 11% in 2022, real wages in many countries remained stagnant. In Italy, purchasing power dropped significantly as wages grew less than 2% annually, leaving workers with much less disposable income than they had just years prior.
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