{
  "title": "Demand vs. Supply Decomposition of Inflation: Cross-Country Evidence with Applications",
  "publication": "IMF Working Papers, October 17, 2023",
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  "summary": "What are the contributions of demand and supply factors to inflation? To address this question, we follow Shapiro (2022) and construct quarterly demand-driven and supply-driven inflation series for 32 countries utilizing sectoral Personal Consumption Expenditures (PCE) data.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Title: Demand vs. Supply Decomposition of Inflation: Cross-Country Evidence with Applications\n- Authors: Melih Firat, Otso Hao\n- Publication date: October 17, 2023\n- Core question: What are the contributions of demand and supply factors to inflation?"
    },
    {
      "heading": "Methodology",
      "content": "- Approach: Follow Shapiro (2022) to construct quarterly demand-driven and supply-driven inflation series.\n- Data: Sectoral Personal Consumption Expenditures (PCE) data for 32 countries.\n- Temporal focus: Highlight decompositions during critical periods such as the great financial crisis of 2008 and the recent inflation surge since 2021."
    },
    {
      "heading": "Key findings",
      "content": "- Decomposition results:\n  - Constructed quarterly demand-driven and supply-driven inflation series for 32 countries using sectoral PCE data.\n  - Emphasized global trends and country-specific differences across episodes including 2008 and since 2021.\n- Validation and responsiveness:\n  - Supply-driven inflation is more reactive to oil shocks and supply chain pressures.\n  - Demand-driven inflation displays a more pronounced response to monetary policy shocks.\n- Phillips curve:\n  - Results suggest a steeper Phillips curve when inflation is demand-driven, with implications for policy design."
    },
    {
      "heading": "Validation and robustness evidence",
      "content": "- External consistency:\n  - Supply-driven series correlate more with oil shocks and supply chain pressures.\n  - Demand-driven series correlate more with monetary policy shocks.\n- Application: Decompositions used to interpret episodes such as the great financial crisis of 2008 and the inflation surge beginning in 2021."
    },
    {
      "heading": "Policy implications",
      "content": "- Policy design should account for the dominant driver of inflation:\n  - When inflation is supply-driven (responsive to oil and supply chain pressures), policy responses differ from when inflation is demand-driven (responsive to monetary policy shocks).\n  - The steeper Phillips curve under demand-driven inflation implies tighter trade-offs for stabilization policy when demand forces dominate.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/09/28/demand-vs-539665"
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    "Authors: Melih Firat, Otso Hao",
    "Published: October 17, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400257339.001",
    "Title: Demand vs. Supply Decomposition of Inflation: Cross-Country Evidence with Applications",
    "Authors: Melih Firat, Otso Hao",
    "Publication date: October 17, 2023",
    "Core question: What are the contributions of demand and supply factors to inflation?",
    "Approach: Follow Shapiro (2022) to construct quarterly demand-driven and supply-driven inflation series.",
    "Data: Sectoral Personal Consumption Expenditures (PCE) data for 32 countries.",
    "Temporal focus: Highlight decompositions during critical periods such as the great financial crisis of 2008 and the recent inflation surge since 2021.",
    "Decomposition results:",
    "Validation and responsiveness:",
    "Phillips curve:",
    "External consistency:",
    "Application: Decompositions used to interpret episodes such as the great financial crisis of 2008 and the inflation surge beginning in 2021.",
    "Policy design should account for the dominant driver of inflation:",
    "**Working Paper**"
  ],
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