Along the price chain: Global supply chain disruptions and inflation in Europe

Tobias Börger and Till Strohsal

No 2026/29, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: Global supply chain disruptions exert substantial and persistent inflationary pressures across Europe. This paper employs local projections to trace the transmission of these shocks along the price chain: import prices respond first, producer prices follow, and consumer prices adjust more slowly. Producer prices rise almost as much as import prices and remain elevated after import prices have returned to baseline, with domestic producer prices responding more strongly than non-domestic producer prices. Among consumer prices, food and energy respond most strongly, while core prices rise less but persistently. After two years, supply chain shocks explain 6 to 14 percent of consumer price forecast error variance in the European Union and its largest economies. Panel local projections reveal cross-country heterogeneity and show that exposure matters: after one year, producer price responses are 0.21 percentage points larger in countries with high shares of bulk-intensive production than in those with low shares. Similar heterogeneity emerges for import and, less robustly, consumer prices. Upstream prices therefore signal consumer price pressures months in advance, and a common disruption can widen inflation differentials across Member States.

Keywords: Global supply chain shocks; inflation; import prices; producer prices; consumer prices; local projections (search for similar items in EconPapers)
JEL-codes: C32 E31 F14 F41 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:344518

DOI: 10.17169/refubium-54251

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