Production Networks and Inflation Spillovers

39 Pages Posted: 27 Jan 2021

Date Written: December 4, 2020


This paper investigates the relationship between input-output networks and the transmission of inflation shocks across manufacturing industries in South Korea, an economy that is open to external shocks. Using the dynamic inflation connectedness measures for 1971-2020, we show that production networks are responsible for the amplification of inflation shocks during times of supply shocks, such as the oil price shocks of 1973-74 and 1979-80. On the contrary, production networks are weakly associated with inflation transmission across sectors if the shocks originate from the demand-side such as the East Asian Financial Crisis of 1997.

Keywords: inflation, input-output, production, network, connectedness,vector autoregression, variance decomposition.

JEL Classification: E3, D57

Suggested Citation

Bilgin, Nuriye Melisa and Yilmaz, Kamil, Production Networks and Inflation Spillovers (December 4, 2020). Available at SSRN: or

Nuriye Melisa Bilgin (Contact Author)

Koc University ( email )

Koc University
Rumelifeneri Yolu
Sariyer, 34450


Kamil Yilmaz

Koc University ( email )

Rumeli Feneri Yolu
Istanbul, 34450
+90 212 338 1458 (Phone)
+90 212 338 1653 (Fax)

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