Geopolitical risk, supply chains, and global inflation

Bibliographic Data

ID21543789
AuthorsOmid Asadollah (Department of Economics Florida International University Miami Florida USA), Linda Schwartz Carmy (Department of Economics Florida International University Miami Florida USA), Md Rezwanul Hoque (0000-0001-7748-0100, Department of Economics Florida International University Miami Florida USA), Hakan Yilmazkuday (0000-0002-8629-6230, Department of Economics Florida International University Miami Florida USA, corresponding author)
Year2024
Volume47
Issue8
Pages3450-3486
Publication date2024-08-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueWorld Economy (JOURNAL)
Journal identifiersISSN: 0378-5920 • E-ISSN: 1467-9701
PublisherWiley (PUBLISHER • GB)
DOI10.1111/twec.13585
OpenAlexW4398144618
LanguageEN
Citations received13
References cited45

This paper investigates the effects of global geopolitical risks and global supply chain pressures on global inflation for the monthly period of 1999M1–2022M12. The investigation is based on a structural vector autoregression model, where the effects of global oil prices and global monetary policy are controlled for. Four alternative measures of inflation are used, including headline, core, food, and energy inflation. The empirical results show that disruptions in global supply chains are the main drivers of global inflation in the long run as the corresponding shocks explain the lion's share of volatilities in headline inflation (by 32%), core inflation (by 30%), and food inflation (by 22%), followed by oil price shocks and policy rate shocks. In comparison, energy inflation is explained the most by oil price shocks (by 55%) followed by supply chain shocks and policy rate shocks. Positive supply chain pressure and oil price shocks have positive and statistically significant effects on headline inflation even after five years, whereas positive policy rate shocks have negative and statistically significant effects on headline inflation in the long run. In contrast, positive shocks to geopolitical risk result in higher headline inflation only up to one year, with insignificant effects in the long run. Several policy implications follow

Biology · Business · Core inflation · Economics · Food prices · Food security · Headline · Inflation targeting · Macroeconomics · Monetary economics · Monetary policy · Supply shock · Vector autoregression · Energy, Environment, and Transportation Policies · Energy, Environment, Economic Growth · Market Dynamics and Volatility

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