How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe

Viral V. Acharya, Matteo Crosignani, Tim Eisert () and Christian Eufinger
Additional contact information
Tim Eisert: https://www.novasbe.unl.pt/en/faculty-research/faculty/faculty-detail/id/1316/tim-eisert?page=44

No 1164, Staff Reports from Federal Reserve Bank of New York

Abstract: We document how the interaction of supply chain pressures, elevated household inflation expectations, and firm pricing power contributed to the pandemic-era surge in consumer price inflation in the euro area. Initially, supply chain disruptions raised inflation, particularly in manufacturing, through a cost-push channel, while also elevating inflation expectations. In turn, higher inflation expectations appear to have lowered the price elasticity of consumer demand and strengthened firms’ pricing power, enabling even firms in service sectors that were initially unaffected by supply constraints to raise markups. Through this expectations mechanism, localized inflation in sectors sensitive to supply-side shocks generalized into broad-based inflation.

Keywords: inflation expectations; euro area; firm markups; market power; supply chain (search for similar items in EconPapers)
JEL-codes: D84 E31 E58 L11 (search for similar items in EconPapers)
Pages: 77
Date: 2025-08-01
New Economics Papers: this item is included in nep-bec, nep-eec and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1164.pdf Full text (application/pdf)
https://www.newyorkfed.org/research/staff_reports/sr1164.html Summary (text/html)

Related works:
Working Paper: How do supply shocks to inflation generalize? Evidence from the pandemic era in Europe (2023)
Working Paper: How Do Supply Shocks to Inflation Generalize? Evidence from the Pandemic Era in Europe (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:101469

Ordering information: This working paper can be ordered from

DOI: 10.59576/sr.1164

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().