Global Value Chain and Inflation Dynamics
IMF Working Papers, March 22, 2024
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- Global Value Chain and Inflation Dynamics
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Bibliographic details
- Authors: Vu Chau, . Marina Conesa Martinez, Taehoon Kim, John A Spray
- Published: March 22, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400268847.001
Data and Methodology
- Novel harmonized dataset of sectoral producer price inflation and input-output linkages for more than 1000 sectors in 53 countries.
- Identification strategy: Bartik shift-share design, where shares reflect heterogeneous sectoral exposure to shocks and are derived from a macroeconomic model of international production network.
Key Findings
- Pandemic lockdowns, and subsequent reopening policies, were the most dominant driver of global inflation during 2020-2022, especially through their impact on aggregate demand.
- Between 20-30 percent of the demand effect of lockdown/reopening is due to spillover from abroad.
- Fiscal and monetary policies played an important role in preventing deflation in 2020, but their effects diminished in the recovery years.
Policy-Relevant Insights
- Demand-side disruptions from lockdowns and reopenings can transmit internationally through global value chains; cross-border spillovers account for 20-30 percent of the demand effect.
- While timely fiscal and monetary stimulus helped avert deflation in 2020, reliance on these policies may yield diminishing returns during subsequent recovery phases.
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