Global Sectoral Supply Shocks, Inflation, and Monetary Policy

We identify two global supply shocks that generate tensions in supply chains: shocks to transportation services and shocks to the production of highly specific intermediate inputs. Using a structural vector autoregression identified with sign, narrative, and boundary restrictions, we exploit their distinct implications for transportation costs. Transportation shocks raise shipping costs, while input production shocks lower equilibrium transportation prices by reducing output and demand for complementary services. Complementing the analysis with a global demand shock, we construct structurally interpretable, monthly indices for supply-side tensions and demand-induced congestion along global supply chains from 1969 to 2024. Both global supply shocks generate recessionary and inflationary effects in U.S. data but differ markedly in persistence and magnitude. Input production shocks produce large and persistent effects and elicit partial monetary policy accommodation, whereas transportation shocks are transitory and largely looked through.