Macroeconomic regime change and the size of supply chain disruption and energy supply shocks

Roberto A. De Santis and Tommaso Tornese

European Economic Review, 2025, vol. 178, issue C

Abstract: The COVID-19 pandemic and Russia’s invasion of Ukraine have complicated macroeconomic forecasting and policymaking due to unprecedented disruptions in supply chains and energy markets, suggesting a new macroeconomic regime. However, we are unable to reject the null hypothesis of no structural break in March 2020. We then examine whether these shocks have increased post-COVID-19. Their sizes were initially elevated, but then have been gradually returning to pre-pandemic levels. The linear and nonlinear models reveal that supply chain disruptions cause persistent increases in expected inflation and headline goods prices, while energy supply shocks have a transitory inflation effect. The nonlinear model shows that real GDP is adversely affected by supply shocks in low growth periods.

Keywords: Business cycles; Supply-chain disruption shocks; Energy shocks; Non-linearities; TVAR; Narrative identification (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:178:y:2025:i:c:s0014292125001278

DOI: 10.1016/j.euroecorev.2025.105077

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