State Dependence of Monetary Policy During Global Supply Chain Disruptions

Francesco Zanetti, Xiwen Bai, Jesus Fernandez-Villaverde and Yiliang Li

No 26-007E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: We study how global supply chain disruptions affect monetary policy transmission. Post-pandemic evidence indicates surging transportation costs, goods-market imbalances, and rising prices. We develop a model in which logistical bottlenecks (upstream slack coexisting with downstream shortages) steepen the aggregate supply curve. This convexity amplifies price responses to monetary policy while dampening output effects. Threshold VAR and Local Projection estimates are consistent with this mechanism: during disruptions, contractionary policy reduces prices more at smaller output cost, easing the stabilization trade-off.

Pages: 56
Date: 2026-05
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Related works:
Working Paper: State Dependence of Monetary Policy During Global Supply Chain Disruptions (2026)
Working Paper: State Dependence of Monetary Policy During Global Supply Chain Disruptions (2026)
Working Paper: State Dependence of Monetary Policy During Global Supply Chain Disruptions (2026)
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