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Assessing the Role of Global Demand and Supply Shocks in the Recent US Inflation Experience Using a Cross-Country Panel Dataset of Professional Forecasts

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  • Patrick C. Higgins

Abstract

Although there have been a range of studies investigating the role and importance of global supply and demand shocks in US inflation developments during and since the pandemic, this study uses a heretofore unused dataset for this purpose: a quarterly panel of professional forecasts from Consensus Economics. We use real-time data with daily vintage snapshots since 2005 from the Federal Reserve Board of Governors FAME database to disentangle forecast errors from revisions and to exploit the monthly frequency and partial availability of CPI inflation and industrial production. Our measures of global demand and supply shocks account for nearly 60 percent, and 20 percent, respectively, of the total variability of the five global factors we identify. The global demand shock accounts for a greater share of unanticipated US economic activity growth and inflation than the global supply shock both prior to the pandemic and during and after 2020. Since 2020, however, global demand and global supply shocks have accounted for similar shares of the nowcast errors for US inflation.

Suggested Citation

  • Patrick C. Higgins, 2025. "Assessing the Role of Global Demand and Supply Shocks in the Recent US Inflation Experience Using a Cross-Country Panel Dataset of Professional Forecasts," FRB Atlanta Working Paper 2025-10, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:101965
    DOI: 10.29338/wp2025-10
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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