Assessing the Impact of Supply Disruptions on the Global Pandemic Recovery

Johannes Kemp, Rafael Portillo and Marika Santoro

No 2023/042, IMF Working Papers from International Monetary Fund

Abstract: We estimate the role of (pre-Ukraine war) supply disruptions in constraining the Covid-19 pandemic recovery, for several advanced economies and emerging markets, and globally. We rely on two approaches. In the first approach, we use sign-restricted Vector Auto Regressions (SVAR) to identify supply and demand shocks in manufacturing, based on the co-movement of surveys on new orders and suppliers’ delivery times. The effects of these shocks on industrial production and GDP are recovered through a combination of local projection methods and the input-output framework in Acemoglu et al. (2016). In the second approach, we use the IMF’s G20 model to gauge the importance of supply shocks in jointly driving activity and inflation surprises. We find that supply disruptions subtracted between 0.5 and 1.2 percent from global value added during the global recovery in 2021, while also adding about 1 percent to global core inflation that same year.

Keywords: Supply constraints; manufacturing; output; inflation; supply and demand demand shock; Ukraine war; supply disruption; supply-demand decomposition; inflation deviation; Supply shocks; Economic recovery; Industrial production; Global (search for similar items in EconPapers)
Pages: 42
Date: 2023-02-24
New Economics Papers: this item is included in nep-cis
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