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The Transmission of Supply Shocks to Inflation: The Case of Argentina 2004-2022

Author

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  • Lucas Ordoñez

    (Interdisciplinary Institute of Political Economy (UBA-CONICET), Argentina; University of Buenos Aires (UBA), Argentina)

Abstract

This article investigates how domestic and external supply shocks influence inflation in Argentina using the Local Projections methodology. I categorise supply shocks into two groups: domestic and external. Domestic supply shocks include the nominal exchange rate and regulated prices. In contrast, external supply shocks include international energy and food prices. The results reveal two main findings. First, both domestic and external supply shocks positively influence inflation. Second, there are significant variations in the magnitude and dynamic of how these supply shocks are transmitted to inflation. These findings provide new evidence on how supply shocks influence inflationary dynamics in developing countries and small open economies.

Suggested Citation

  • Lucas Ordoñez, 2025. "The Transmission of Supply Shocks to Inflation: The Case of Argentina 2004-2022," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(85), pages 51-91, May.
    • Handle: RePEc:bcr:ensayo:v:1:y:2025:i:85:p:51-91
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    More about this item

    Keywords

    cost-push shocks; exchange rate pass-through; impulse responses; inflation; Local Projections; supply shocks;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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