Global Supply Chain Pressures, International Trade, and Inflation
Julian di Giovanni,
Kalemli-Özcan, Á¹¢ebnem,
Álvaro Silva and
Yıldırım, Muhammed A.
No 17449, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
We study the impact of the Covid-19 pandemic on Euro Area inflation and how it compares to the experiences of other countries, such as the United States, over the two-year period 2020-21. Our model-based calibration exercises deliver four key results: 1) Compositional effects -- the switch from services to goods consumption -- are amplified through global input-output linkages, affecting both trade and inflation. 2) Inflation can be higher under sector-specific labor shortages relative to a scenario with no such supply shocks. 3) Foreign shocks and global supply chain bottlenecks played an outsized role relative to domestic aggregate demand shocks in explaining Euro Area inflation over 2020-21. 4) International trade did not respond to changes in GDP as strongly as it did during the 2008-09 crisis despite strong demand for goods. These lower trade elasticities in part reflect supply chain bottlenecks. These four results imply that policies aimed at stimulating aggregate demand would not have produced as high an inflation as the one observed in the data without the negative sectoral supply shocks.
Keywords: Inflation; International trade; Supply chains; Spillovers (search for similar items in EconPapers)
JEL-codes: E2 E3 E6 F1 F4 (search for similar items in EconPapers)
Date: 2022-07
References: Add references at CitEc
Citations:
Downloads: (external link)
https://cepr.org/publications/DP17449 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Working Paper: Global Supply Chain Pressures, International Trade, and Inflation (2022) 
Working Paper: Global Supply Chain Pressures, International Trade, and Inflation (2022) 
Working Paper: Global Supply Chain Pressures, International Trade, and Inflation (2022) 
Working Paper: Global Supply Chain Pressures, International Trade, and Inflation (2022) 
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:cpr:ceprdp:17449
Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17449
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().