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How Much Can GSCPI Improvements Help Reduce Inflation?

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Abstract

Inflationary pressures—their determinants and evolution—continue to dominate policy discussions. In this post, we provide a simple framework to analyze the determinants of different measures of inflation and use it to lay out a risk-scenario analysis. We find that global supply factors captured by the New York Fed’s Global Supply Chain Pressure Index (GSCPI) are strongly associated with inflationary developments measured by the producer price index (PPI) and by the c0nsumer price index (CPI). Under the assumption that the GSCPI falls back to its historical average over twelve months, our model would project a substantial easing of consumer price inflation over 2023 to below 4.0 percent. The normalization of the GSCPI would then be consistent with a return of inflation to levels consistent with a soft-landing scenario.

Suggested Citation

  • Ozge Akinci & Gianluca Benigno & Hunter L. Clark & William Cross-Bermingham & Ethan Nourbash, 2023. "How Much Can GSCPI Improvements Help Reduce Inflation?," Liberty Street Economics 20230222, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:95692
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    File URL: https://libertystreeteconomics.newyorkfed.org/2023/02/how-much-can-gscpi-improvements-help-reduce-inflation/
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    More about this item

    Keywords

    inflation; Global Supply Chain Pressure Index (GSCPI); oil price;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F0 - International Economics - - General

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