Measuring Shortages since 1900

Dario Caldara, Matteo Iacoviello and David Yu

No 1407, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper introduces a monthly shortage index spanning 1900 to the present, constructed from 25 million newspaper articles. The index captures shortages across industry, labor, food, and energy, and spikes during economic crises and wars. We validate the index and show that it provides information beyond traditional macroeconomic indicators. Using predictive regressions, we find that shortages are associated with persistently high inflation and lower economic activity. A structural VAR model reveals that, compared to a traditional supply shock, surprise movements in shortages produce less inflation relative to their GDP impact, suggesting that shortages are associated with constraints on price adjustment that limit inflation but magnify the decline in real activity. We also show that post-pandemic shortages and inflation were primarily driven by supply forces, with demand factors playing a less important role.

Keywords: Shortages; Inflation; Textual analysis; Predictive regressions; Structural VAR model (search for similar items in EconPapers)
JEL-codes: C32 C55 E31 N10 (search for similar items in EconPapers)
Date: 2025-05-09
New Economics Papers: this item is included in nep-his and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1407

DOI: 10.17016/IFDP.2025.1407

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