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Discussion Paper
How Do Trade Disruptions Affect Inflation?
To quantify the effects of trade disruptions on inflation, we construct a measure of bilateral trade costs for a panel of 41 countries using annual data from 1995 through 2020. We then estimate an empirical model linking changes in trade costs to inflation.
Working Paper
Trade Costs and Inflation Dynamics
We explore how shocks to trade costs affect inflation dynamics in the global economy. We exploit bilateral trade flows of final and intermediate goods together with the structure of static trade models that deliver gravity equations to identify exogenous changes in trade costs between countries. We then use a local projections approach to assess the effects of trade cost shocks on consumer price (CPI) inflation. Higher trade costs of final goods lead to large but short-lived increases in inflation, while increases in trade costs of intermediate goods generate small but persistent increases in ...
Discussion Paper
Has the Inflation Process Become More Persistent? Evidence from the Major Advanced Economies
The sustained surge in inflation around the world following the pandemic has raised the possibility that the inflation process has become more persistent. Such a rise in persistence could result from firms and households putting greater weight on past inflation outcomes in their price- and wage-setting decisions than they did in the recent past, say, because they have less conviction that inflation will return promptly to target.
Working Paper
Trade Costs and Inflation Dynamics
We study how trade cost shocks influence inflation. Using bilateral trade flows from detailed global input-output data and a gravity framework, we estimate trade cost shocks and their effects on CPI inflation. Higher trade costs for final goods cause large but short-lived inflation spikes, while increased costs for intermediate inputs trigger more persistent inflation. A multi-country model of inflation with trade in final goods and intermediate inputs replicates these patterns. We show that trade cost shocks and tariffs on imported inputs transmit through global value chains and worsen ...
Working Paper
On the GDP Effects of Severe Physical Hazards
We assess the impacts from physical hazards (or severe weather events) on economic activity in a panel of 98 countries using local projection methods. Proxying the strength of an event by the monetary damages it caused, we find severe weather events to reduce the level of GDP. For most events in the EM-DAT data set the effects are small. The largest events in our sample (above the 90th percentile of damages) bring down the level of GDP by 0.5 percent for several years without recovery to trend. Smaller events (below the 90th percentile) see a less immediate decrease in initial years (0.1 ...