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Global Supply Chain Pressures, International Trade, and Inflation
We study the impact of the COVID-19 pandemic on euro area inflation and how it compares to the experiences of other countries, such as the United States, over the two-year period 2020-21. Our model-based calibration exercises deliver four key results: (1) compositional effects, or the switch from services to goods consumption, are amplified through global input-output linkages, affecting both trade and inflation; (2) inflation can be higher under sector-specific labor shortages relative to a scenario with no such supply shocks; (3) foreign shocks and global supply chain bottlenecks played an ...
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Pandemic-Era Inflation Drivers and Global Spillovers
We estimate a multi-country, multi-sector New Keynesian model to quantify the drivers of domestic inflation during 2020–23 in several countries, including the United States. The model matches observed inflation together with sector-level prices and wages. We further measure the relative importance of different types of shocks on inflation across countries over time. The key mechanism, the international transmission of demand, supply and energy shocks through global linkages helps us to match the behavior of the USD/EUR exchange rate. The quantification exercise yields four key findings. ...
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Quantifying the Inflationary Impact of Fiscal Stimulus under Supply Constraints
This paper builds on Baqaee and Farhi (2022) and di Giovanni et al. (2022) to quantify thecontribution of fiscal policy to U.S. inflation over the December 2019-June 2022 period. Modelcalibrations show that aggregate demand shocks explain roughly two-thirds of total model-basedinflation, and that the fiscal stimulus contributed half or more of the total aggregate demand effect.