Commodity price shocks, supply chain disruptions and U.S. inflation

Elena Maria Diaz, Juncal Cunado and Fernando Perez de Gracia

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: This paper analyzes the impact of commodity price shocks and global supply chain disruptions on U.S. inflation rates. Based on the idea that the inflationary effect of particular commodities is time-varying, our main contribution is to construct a Cost-Push Commodity (CPC) factor through a genetic algorithm which allows to recursively select the combination of commodity prices that best explain U.S. inflation over time. When this factor is included into a Structural Vector Autoregressive (SVAR) model, average and time-varying impulse response functions show how the U.S. inflation rate has responded to commodity price shocks and supply chain disruptions over the sample period, including the crisis caused by the COVID-19 pandemic. Important policy implications can be derived from these results.

Keywords: Cost-push commodity factor; Supply chain disruptions; Inflation; Structural VAR (search for similar items in EconPapers)
JEL-codes: E32 E37 F47 F62 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s154461232300867x

DOI: 10.1016/j.frl.2023.104495

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