IMF Working Papers

The Energy Origins of the Global Inflation Surge

By Jorge A Alvarez, Thomas Kroen

May 9, 2025

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Format: Chicago

Jorge A Alvarez, and Thomas Kroen. "The Energy Origins of the Global Inflation Surge", IMF Working Papers 2025, 091 (2025), accessed June 19, 2025, https://doi.org/10.5089/9798229008310.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper investigates the relationship between energy prices and inflation dynamics in the context of the global inflation surge during the COVID-19 pandemic. Using a comprehensive sector-level dataset covering over 30 countries and a local projections empirical strategy, we extend previous studies that primarily focused on single-country analyses or aggregate inflation measures. Our findings indicate that while the energy shocks of 2021–2022 were remarkable, the degree of inflation passthrough of energy shocks appears to be relatively stable over time. Moreover, we show that energy price shocks significantly influence inflation through stable sectoral channels, with structural characteristics such as energy dependence and price flexibility playing critical roles in the passthrough mechanism. These results underscore the necessity of a sectoral perspective in understanding inflationary pressures and highlight the importance of detailed data on price-setting mechanisms and intersectoral connectivity in understanding the energy-inflation passthrough.

Subject: Climate change, Climate policy, Energy prices, Energy pricing, Environment, Expenditure, Inflation, Natural disasters, Oil prices, Prices, Public debt, Revenue administration

Keywords: Climate change, Climate policy, Energy inflation, Energy Prices, Energy pricing, Energy-inflation Passthrough, Enterprise risk, Fund disbursement, Global, Inflation, Inflation Passthrough, Inflation surge, Local Projections., Monetary policy committee, Natural disasters, Oil prices, Pakistan CCDR, Policy discussion, Policy priority, Policy rate remains, Price flexibility, Price Rigidities, Production Networks

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