Pandemic-induced constraints and inflation in advanced economies

Alina Bobasu, Luigi Crucil, Alistair Dieppe and Marcel Tirpák

Economic Bulletin Boxes, 2021, vol. 1

Abstract: This box studies the relative impact on inflation of pandemic-induced demand and supply constraints for key advanced economies outside the euro area by using granular data on consumption expenditures and prices and a structural Bayesian Vector Autoregression (BVAR) framework. It finds that during the initial phase of the pandemic, consumer price inflation was driven more by demand-sensitive components and less by supply-sensitive ones. The structural analysis confirms a dominant role for demand shocks in the pandemic. It concludes that the impact of pandemic-related supply constraints on inflation appears limited to date. Yet, more granular analysis is needed to assess the consequences of the pandemic for the drivers of inflation. JEL Classification: C11, E31, E32, O11, O40

Keywords: demand shortages; inflation outlook; pandemic crisis; supply constraints (search for similar items in EconPapers)
Date: 2021-02
Note: 95834
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