Propagation of shocks in an input-output economy: Evidence from disaggregated prices

Shaowen Luo and Daniel Villar

Journal of Monetary Economics, 2023, vol. 137, issue C, 26-46

Abstract: Using disaggregated industry-level data, this paper empirically evaluates predictions for the cross-sectional price change distribution made by input-output models with sticky prices. The response of prices to shocks is found to be consistent with the price sensitivities predicted by the input-output model. Moreover, moments of the sectoral price change distribution vary over time in response to the evolution of the network structure. Finally, through a quantitative analysis, demand and supply shocks are disentangled during the pandemic period. Counterfactual analyses show that sectoral supply shocks, aggregate demand shocks and the production network structure contributed significantly to the inflation surge in 2021–2022.

Keywords: Nominal rigidity; Production network; Propagation of shocks; Inflation; Pandemic (search for similar items in EconPapers)
JEL-codes: C67 E31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S030439322300048X
Full text for ScienceDirect subscribers only

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:eee:moneco:v:137:y:2023:i:c:p:26-46

DOI: 10.1016/j.jmoneco.2023.05.004

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().