How Much Can GSCPI Improvements Help Reduce Inflation?

Ozge Akinci, Gianluca Benigno, Hunter Clark, William Cross-Bermingham and Ethan Nourbash

No 20230222, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Inflationary pressures—their determinants and evolution—continue to dominate policy discussions. In this post, we provide a simple framework to analyze the determinants of different measures of inflation and use it to lay out a risk-scenario analysis. We find that global supply factors captured by the New York Fed’s Global Supply Chain Pressure Index (GSCPI) are strongly associated with inflationary developments measured by the producer price index (PPI) and by the c0nsumer price index (CPI). Under the assumption that the GSCPI falls back to its historical average over twelve months, our model would project a substantial easing of consumer price inflation over 2023 to below 4.0 percent. The normalization of the GSCPI would then be consistent with a return of inflation to levels consistent with a soft-landing scenario.

Keywords: inflation; Global Supply Chain Pressure Index (GSCPI); oil price (search for similar items in EconPapers)
JEL-codes: E31 E52 F0 (search for similar items in EconPapers)
Date: 2023-02-22
New Economics Papers: this item is included in nep-int, nep-mac and nep-mon
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