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How Much Did Supply Constraints Boost U.S. Inflation?

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Abstract

What factors are behind the recent inflation surge has been a huge topic of debate amongst academics and policymakers. We know that pandemic-related supply constraints such as labor shortages and supply chain bottlenecks have been key factors pushing inflation higher. These bottlenecks started with the pandemic (lockdowns, sick workers) and were made worse by the push arising from increased demand caused by very expansionary fiscal and monetary policy. Our analysis of the relative importance of supply-side versus demand-side factors finds 60 percent of U.S. inflation over the 2019-21 period was due to the jump in demand for goods while 40 percent owed to supply-side issues that magnified the impact of this higher demand.

Suggested Citation

  • Julian di Giovanni, 2022. "How Much Did Supply Constraints Boost U.S. Inflation?," Liberty Street Economics 20220824, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:94678
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    Cited by:

    1. Cardani, Roberta & Pfeiffer, Philipp & Ratto, Marco & Vogel, Lukas, 2023. "The COVID-19 recession on both sides of the Atlantic: A model-based comparison," European Economic Review, Elsevier, vol. 158(C).
    2. -, 2022. "United States economic outlook: Inflation trends post COVID-19," Oficina de la CEPAL en Washington (Estudios e Investigaciones) 48514, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

    More about this item

    Keywords

    inflation; supply chain bottlenecks; supply-demand factors;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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