Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297404 
Year of Publication: 
2023
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2023-19
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper examines the contribution of several supply factors to US headline inflation since the start of the COVID-19 pandemic. We identify six supply shocks using a structural VAR model: labor supply, labor productivity, global supply chain, oil price, price mark-up and wage mark-up shocks. Our shock identification relies mainly on sign restrictions. But for the global supply chain shock, we propose a new identification scheme combining sign, narrative and variance decomposition restrictions. Historical decomposition results suggest that global supply chain and oil price shocks are the biggest supply contributors to the US inflation during the pandemic. In contrast, labor shortages only mildly contribute to inflation, but their impact on output is larger in that period. Additionally, price and wage mark-up shocks start to significantly contribute to inflation only towards the middle of 2022. Finally, our analysis, which also allows the identification of monetary policy and aggregate demand shocks, suggests that demand and supply factors are almost equally responsible for the movements in the inflation rate during the pandemic.
Subjects: 
Business fluctuations and cycles
Econometric and statistical methods
Inflation and prices
JEL: 
C32
E31
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





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