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Understanding Post-Pandemic Inflation Fluctuations: The Commodity Cost Channel

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  • Gert Peersman

Abstract

This paper employs a joint SVAR-IV model for the United States and the euro area to estimate the pass-through of energy and food commodity cost shocks to inflation. Exogenous commodity cost shocks — such as those triggered by the Russian invasion of Ukraine — had only a modest impact on inflation during the post-pandemic period. However, counterfactual analyses based on the pass-through estimates indicate that overall commodity cost fluctuations — including their endogenous responses to macroeconomic conditions — can almost fully account for the rise and subsequent decline of energy, food, and core CPI inflation over this period. These findings highlight that commodity costs constitute a key transmission channel through which macroeconomic developments affect inflation. Estimates of a standard Phillips Curve specification, including its slope, are shown to be severely biased when this channel is ignored.

Suggested Citation

  • Gert Peersman, 2026. "Understanding Post-Pandemic Inflation Fluctuations: The Commodity Cost Channel," CESifo Working Paper Series 12415, CESifo.
    • Handle: RePEc:ces:ceswps:_12415
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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