Shocked to the core: a new model to understand euro area inflation

Marta Banbura, Elena Bobeica and Catalina Martínez Hernández

Research Bulletin, 2024, vol. 117

Abstract: The pandemic's disruption of global supply chains and the spike in natural gas prices following Russia’s invasion of Ukraine were significant drivers of surging inflation. Traditional inflation models often ignore such supply-side shocks, even though they can have a significant and persistent impact on core inflation in the euro area (as measured by rates of change in the Harmonised Index of Consumer Prices excluding the energy and food components). In response, we propose a new model that takes these and other factors into account, particularly as future inflation dynamics could be shaped by the impact of geopolitical tensions on supply chains and the role of gas in the green transition. JEL Classification: E31, C32, C38

Keywords: Bayesian VAR; Gas price shocks; Inflation; Supply-side shocks (search for similar items in EconPapers)
Date: 2024-03
Note: 810771
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ecb.europa.eu//press/research-publicat ... 9~ea06781467.en.html (text/html)
https://www.ecb.europa.eu//press/research-publicat ... 19~ea06781467.en.pdf (application/pdf)

Related works:
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:ecb:ecbrbu:2024:0117:

Access Statistics for this article

More articles in Research Bulletin from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().