The global effects of an oil price shock in NiGEM

Iana Liadze (), Corrado Macchiarelli, Patricia Sánchez Juanino and Barry Naisbitt ()

National Institute Global Economic Outlook, 2022, issue 7, 32-39

Abstract: The global economic system has been hit by a series of shocks in the past three years. First, Covid-19 and governments' restrictions in response to the public health risks slammed the brakes on global economic activity. At the same time, governments and monetary authorities responded strongly to support economies. Then, as the threat from Covid-19 receded somewhat, the rapid pace of the recovery in demand, at a time when Covid-19 restrictions were still being applied in some countries, triggered supply chain shortages which fed into higher inflation. At the same time, oil prices increased by 50 per cent during 2021. Central banks in the advanced economies initially interpreted these events as being predominantly supply shocks to the global economy, with the hope that the supply bottlenecks would prove to be transitory as economies returned to their pre-pandemic levels of economic activity and that the oil price might stabilize.

Date: 2022
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