 Supply shortages and inflation in EuropeJakub Mućk and Łukasz Postek Economica, 2025, vol. 92, issue 366, 420-456 Abstract: This paper contributes to the literature by quantifying the effects of supply shortages on inflation in 19 European economies. In contrast to many other papers, it focuses on factual country‐specific shortages in materials and equipment reported by enterprises in the business surveys conducted by the European Commission rather than supply chain tensions that are measured only globally or for some major economies. We apply the local projections method in a panel framework, and estimate the responses of nine measures of consumer and producer inflation to supply shortages. We find that supply shortages are inflationary for all considered measures of inflation, and a larger effect can be observed for the inflation of prices of goods rather than services. The peak of impulse responses can be observed 4–6 quarters after a shock, while the effect usually dies out after 8–12 quarters. After a year, a one‐standard‐deviation shock in supply shortages is followed by annual inflation being higher by 0.7–3.4 percentage points, depending on the inflation measure. Interestingly, the inflationary effects of supply shortages seem to be related mainly to periods of intense global supply tensions. Date: 2025 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:econom:v:92:y:2025:i:366:p:420-456 Ordering information: This journal article can be ordered from Access Statistics for this article Economica is currently edited by Frank Cowell, Tore Ellingsen and Alan Manning More articles in Economica from London School of Economics and Political Science Contact information at EDIRC. |
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