Supply Bottlenecks: Where, Why, How Much, and What Next?
IMF Working Papers, February 17, 2022
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- Supply Bottlenecks: Where, Why, How Much, and What Next?
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Bibliographic details
- Authors: Oya Celasun, Niels-Jakob H Hansen, Aiko Mineshima, Mariano Spector, Jing Zhou
- Published: February 17, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400202476.001
Key findings
- Supply constraints hurt the economic recovery and boosted inflation in 2021.
- In the euro area:
- Manufacturing output would have been about 6 percent higher in the absence of supply bottlenecks.
- GDP would have been about 2 percent higher in the absence of supply bottlenecks.
- Half of the rise in manufacturing producer price inflation would not have occurred in the absence of supply bottlenecks.
- Globally, shutdowns can explain up to 40 percent of the supply shocks.
- Sectors more reliant on differentiated inputs—such as autos—are harder hit.
Quantitative estimates and scope
- Manufacturing output: about 6 percent higher in the euro area without bottlenecks.
- GDP: about 2 percent higher in the euro area without bottlenecks.
- Contribution of shutdowns to global supply shocks: up to 40 percent.
- Report length: 50 pages.
- Series and identification: Working Paper No. 2022/031; Issue 031; Volume 2022; Stock No. WPIEA2022031; ISBN 9798400202476; ISSN 1018-5941; DOI https://doi.org/10.5089/9798400202476.001.
Drivers, sectors, and mechanisms
- Shutdowns are a major contributor to supply shocks (up to 40 percent globally).
- Reliance on differentiated inputs amplifies vulnerability; autos identified as a notably affected sector.
- Supply bottlenecks translated directly into higher producer price inflation in manufacturing.
Timing, outlook, and scenarios
- Late last year industry experts expected:
- Supply shortages for autos to largely dissipate by mid-2022.
- Broader bottlenecks to ease by end-2022.
- Given the Omicron wave, disruptions are expected to last for longer, possibly into 2023.
Policy implications and recommendations
- Supply constraints are adding to price pressures.
- The core policy challenge: support the economic recovery without allowing high inflation to become entrenched.
- Policymakers need to weigh measures that alleviate supply-side frictions while avoiding policies that would lock in elevated inflation.
IMF Working Paper No. 2022/031 by Oya Celasun, Niels-Jakob H Hansen, Aiko Mineshima, Mariano Spector, and Jing Zhou (February 17, 2022).
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