Global supply chain pressures, inflation, and implications for monetary policy

Guido Ascari, Dennis Bonam and Andra Smadu

Journal of International Money and Finance, 2024, vol. 142, issue C

Abstract: How should policymakers respond to the recent surge in inflation? This paper examines the impact of global supply chain pressures on euro area inflation and the implications for monetary policy. Results from a Bayesian structural vector autoregressive model show that shocks to global supply chain pressures were the dominant driver of euro area inflation in 2022, and that these shocks have a highly persistent and hump-shaped impact on inflation. Furthermore, a two country New Keynesian model with international trade in intermediate goods shows that the optimal monetary policy response to global-supply-induced inflation is a non-linear function of the degree of global value chain participation.

Keywords: Inflation; Global supply chain pressures; Optimal monetary policy; Phillips curve; Vector autoregression; Bayesian techniques; DSGE (search for similar items in EconPapers)
JEL-codes: E30 E31 E32 E37 E50 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:142:y:2024:i:c:s0261560624000160

DOI: 10.1016/j.jimonfin.2024.103029

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