Why Do Supply Disruptions Lead to Inflation? Survey Evidence from the COVID Pandemic

Thomas Andreas Kohler, Jean-Paul L’Huillier, Gregory Phelan and Maximilian Weiß

No 12212, CESifo Working Paper Series from CESifo

Abstract: Firms tend to justify price increases as necessary to cover rising costs. However, standard models imply that firms not only adjust prices to cost increases, but also to changes in spending. We present a model where, instead, there is differential adjustment depending on the type of shock. The model is disciplined using a firm survey, which shows that, towards the end of the pandemic, price increases were primarily a response to higher costs. In contrast, firms report not reacting to higher demand to avoid upsetting customers. Supply shocks are responsible for most of the upward adjustment of prices.

Keywords: inflation bursts; optimal strategies; price gouging; monetary policy tradeoffs (search for similar items in EconPapers)
JEL-codes: D82 E31 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ifo.de/DocDL/cesifo1_wp12212.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:ces:ceswps:_12212

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().