Gas market shocks: tracing the effect on euro area inflation expectations

Jakob Feveile Adolfsen, Marie-Sophie Lappe, Ana-Simona Manu, Denise Rößler, Fabian Schupp and Arthur Stalla-Bourdillon

No 3227, Working Paper Series from European Central Bank

Abstract: This paper examines the impact of natural gas market shocks on gas market dynamics, inflation expectations and realized inflation in the Euro Area using a BVAR model. Our contribution lies in a novel identification strategy that distinguishes between various types of shocks of unprecedented detail, leverages weekly rather than monthly data, and extends the analysis to both market-based headline and core inflation expectations. We find that, although conceptually distinct, pipeline and liquefied natural gas (LNG) supply shocks have comparable effects on realized variables such as gas prices and actual inflation. By contrast, LNG supply shocks play a more limited role in shaping inflation expectations. Precautionary demand and industrial demand shocks also emerge as important drivers of inflation dynamics. This reflects both the forward-looking nature of precautionary shocks, which capture changes in investor sentiment, and the broader macroeconomic relevance of industrial demand shocks, whose effects extend beyond the gas market. JEL Classification: C50, C54, E44, Q43

Keywords: demand shocks; gas price; inflation-linked swaps; local projections; supply shocks (search for similar items in EconPapers)
Date: 2026-05
Note: 2663204
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3227~2a32fe33b7.en.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:ecb:ecbwps:20263227

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().