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Post-pandemic inflation dynamics in Portugal: an application of the Bernanke-Blanchard model

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  • Nuno Vilarinho Goncalves

Abstract

This paper applies the Bernanke and Blanchard (2023) model to analyse the drivers of postpandemic inflation in Portugal, comparing the results with those for the euro area. The analysisreveals that transitory supply-side shocks, particularly related to energy and food prices, alongside global supply chain disruptions, were the primary drivers of inflation in Portugal until 2023. Labour market tightness emerged as a significant inflationary factor from 2023, contributing to persistent inflationary pressures through a stronger wage-to-price pass-through than in the euro area. Conditional projections suggest a slow decline in inflation, though remaining above 2% in the short-term, as labour market conditions continue to exert upward pressure on prices. These findings imply that the inflation dynamics in Portugal, while aligned with broader euro area trends, exhibit distinct labour market-driven inflation persistence.

Suggested Citation

  • Nuno Vilarinho Goncalves, 2024. "Post-pandemic inflation dynamics in Portugal: an application of the Bernanke-Blanchard model," Working Papers w202418, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w202418
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    File URL: https://www.bportugal.pt/sites/default/files/documents/2024-12/WP202418.pdf
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    References listed on IDEAS

    as
    1. Massimiliano Pisani & Alex Tagliabracci, 2024. "What caused the post-pandemic inflation in Italy? An application of Bernanke and Blanchard (2023)," Questioni di Economia e Finanza (Occasional Papers) 851, Bank of Italy, Economic Research and International Relations Area.
    2. Morteza Ghomi & Samuel Hurtado & José Manuel Montero, 2024. "Analysis of recent inflation dynamics in Spain. An approach based on the Blanchard and Bernanke (2023) model," Occasional Papers 2404, Banco de España.
    3. Menz, Jan-Oliver, 2024. "Sources of post-pandemic inflation in Germany and the euro area: An application of Bernanke and Blanchard (2023)," Technical Papers 02/2024, Deutsche Bundesbank.
    4. Olivier J. Blanchard & Ben S. Bernanke, 2024. "An Analysis of Pandemic-Era Inflation in 11 Economies," NBER Working Papers 32532, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • 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

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