Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297315 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2875
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We propose a framework to identify a rich set of structural drivers of inflation in order to understand the role of the multiple and concomitant sources of the post-pandemic inflation surge. We specify a medium-sized structural Bayesian VAR on a comprehensive set of variables for the euro area economy. We analyse in particular various types of supply shocks, some of which were not considered relevant before the pandemic, notably global supply chain shocks and gas price shocks. The residuals of the VAR are assumed to admit a factor structure and the shocks are identified via zero and sign restrictions on factor loadings. The framework can deal with ragged-edge data and extreme observations. Shocks linked to global supply chains and to gas prices have exhibited a much larger influence than in the past. Overall, supply shocks can explain the bulk of the post-pandemic inflation surge, also for core inflation. Being able to gauge the impact of such shocks is useful for policy making. We show that a counterfactual core inflation measure net of energy and global supply chain shocks has been more stable after the pandemic.
Subjects: 
Inflation
Bayesian VAR
Supply shocks
Gas prices
Supply chain bottlenecks
JEL: 
E31
C32
C38
Q54
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6252-0
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.