The Global Supply Side of Inflationary Pressures

Abbai, Belai; Akinci, Ozge; Benigno, Gianluca; Groen, Jan J. J.; Heymann, Ruth Cesar; Lin, Lawrence; Noble, Adam I.; di Giovanni, Julian

Discussion Paper

The Global Supply Side of Inflationary Pressures

Abstract: U.S. inflation has surged as the economy recovers from the COVID-19 recession. This phenomenon has not been confined to the U.S. economy, as similar inflationary pressures have emerged in other advanced economies albeit not with the same intensity. In this post, we draw from the current international experiences to provide an assessment of the drivers of U.S. inflation. In particular, we exploit the link among different measures of inflation at the country level and a number of global supply side variables to uncover which common cross-country forces have been driving observed inflation. Our main finding is that global supply factors are very strongly associated with recent producer price index (PPI) inflation across countries, as well as with consumer price index (CPI) goods inflation, both historically and during the recent bout of inflation acceleration.

Keywords: inflation; supply; goods; CPI; PPI; euro area; OECD; GSCPI; global; demand;

JEL Classification: F00;