Pandemic-Era Inflation Drivers and Global Spillovers

We employ a multi-country multi-sector New Keynesian model to analyze the factors driving pandemic-era inflation. The model incorporates both sector-specific and aggregate shocks, which propagate through the global trade and production network and generate demand and supply imbalances, leading to inflation and spillovers. The baseline quantitative exercise matches changes in aggregate and sectoral prices and wages for a sample of countries including the United States, Euro Area, China, and Russia. Our findings indicate that supply-chain bottlenecks ignited inflation in 2020, followed by a surge in prices driven by aggregate demand shocks from 2021 through 2022, exacerbated by rising energy prices.

Keywords: inflation, international spillovers, global production network

JEL Classification: E2, E3, E6, F1, F4

Suggested Citation: Suggested Citation

di Giovanni, Julian and Kalemli-Ozcan, Sebnem and Silva, Alvaro and Yildirim, Muhammed Ali, Pandemic-Era Inflation Drivers and Global Spillovers (November 01, 2023). FRB of New York Staff Report No. 1080, Rev. July 2024, https://doi.org/10.59576/sr.1080 , Available at SSRN: https://ssrn.com/abstract=4641566 or http://dx.doi.org/10.2139/ssrn.4641566