Impact of global supply disruptions and energy prices on inflation in European countries

Mirjana Miletic, Danilo Cerovic and Aleksandar Tomin, Mirjana Miletic, Danilo Cerovic and Aleksandar Tomin
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Mirjana Miletic: National Bank of Serbia
Danilo Cerovic: National Bank of Serbia
Aleksandar Tomin: National Bank of Serbia

Working Papers Bulletin from National Bank of Serbia

Abstract: The aim of this paper is to examine the extent to which global factors – supply chain disruptions and rising oil prices – affect inflation in Serbia and other European countries, this being particularly important in the context of the ongoing episode of global inflation growth, which is largely a consequence of the outbreak of the Covid-19 pandemic, but also of the energy crisis and the conflict in Ukraine. The analysis was carried out using the panel method, whereby an estimation was made for 31 European countries considered together and separately for European advanced and emerging economies. The analysis was carried out for the period from Q1 2006 to Q2 2023 using the panel ARDL model and estimates were obtained using the PMG and DFE methods, as well as the asymmetric ARDL model, where the inflationary impact of the rise and fall in global energy prices and of the tightening and easing of supply bottlenecks was tested separately. The obtained results suggest that global supply chain disruptions have a statistically significant effect on consumer and producer prices in the long term, and global oil prices in both the short and long term (controlled for the influence of domestic factors). The link between inflation and supply bottlenecks has been confirmed for both advanced and emerging economies, as well as by various disruption indicators (the European Commission’s Business Climate Indicator, measuring the level of disruption specific to a country, and the Fed’s Global Supply Chain Pressure Index, gauging the intensity of global pressures), which indicates the robustness of the obtained estimates. When the asymmetric ARDL model is applied, a higher coefficient is obtained for the indicator of global supply chain disruptions (measured by GSCPI) when a negative shock occurs (their loosening) than in the case of a positive shock (tightening), which is a consequence of the significant drop in this indicator in the last three quarters of the period analysed. This suggests that the obtained result is not robust in relation to the period analysed, which is why, before drawing final conclusions regarding this part of the analysis, the model should be re-evaluated once data for a few more quarters become available.

Keywords: inflation; global supply chain disruptions; energy; panel (search for similar items in EconPapers)
JEL-codes: C32 C33 E43 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2023-09
New Economics Papers: this item is included in nep-cis, nep-eec, nep-ene, nep-inv, nep-mon and nep-tra
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