{
  "title": "Monitoring Demand and Supply in Asia: An Industry Level Approach",
  "publication": "IMF Working Papers, October 17, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2023/09/28/monitoring-demand-and-supply-in-asia-an-industry-level-approach-539479",
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  "summary": "This paper provides a decomposition of GDP and its deflator into demand and supply driven components for 12 Asian countries, the US and Europe, following the forecast error-based methodology of Shapiro (2022).",
  "sections": [
    {
      "heading": "Methodology",
      "content": "- Decomposition of GDP and its deflator into demand- and supply-driven components for 12 Asian countries, the US and Europe, following the forecast error-based methodology of Shapiro (2022).\n- Extensions to Shapiro (2022) methodology:\n  - Consideration of a wide range of statistical forecasting models and selection of the optimal model for each country.\n  - Provision of a measure of idiosyncratic demand and supply movements to distinguish aggregate demand-driven inflation from inflation driven by large shocks in a small number of sectors."
    },
    {
      "heading": "Key findings",
      "content": "- Lockdowns in 2020:\n  - Explained by a mix of demand and supply shocks in Asia.\n  - Idiosyncratic demand shocks played a significant role in some countries.\n- Post-COVID recovery dynamics:\n  - Supply factors played an important role primarily in 2021.\n  - Demand factors became more important in 2022.\n- Inflation surge in 2021-22:\n  - Mix of shocks differs by country.\n  - Large and advanced economies generally experienced more supply shocks: China, Australia, Korea.\n  - Emerging markets experienced significant demand pressures pushing up prices: Indonesia, Malaysia, Philippines, Vietnam, Thailand."
    },
    {
      "heading": "Applications and empirical illustrations",
      "content": "- Keynesian supply shocks:\n  - Investigation of whether industry supply shocks created demand-like movements in aggregate prices and quantities.\n  - Evidence found for this mechanism in a minority of countries in the Asia sample, and also for Europe and the USA.\n  - These results are driven by the COVID-19 event.\n- Cross-country growth spillovers:\n  - Use of granular industry-level idiosyncratic shocks to construct country-level GDP shocks.\n  - Analysis of cross-country growth spillovers for the three large economic units in the sample: China, Europe and the US."
    },
    {
      "heading": "Subject areas and keywords (as listed)",
      "content": "- Subject: COVID-19, Deflation, Economic theory, Financial sector policy and analysis, Health, Inflation, Prices, Spillovers, Supply shocks\n- Keywords: Asia and Pacific, COVID-19, Deflation, Demand, demand and supply movement, demand and supply shock, Europe, GDP shock, Global, growth spillover, Inflation, inflation decomposition, Machine Learning, Spillovers, Supply, Supply shocks\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/monitoring-demand-and-supply-in-asia-an-industry-level-approach-539479"
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    "Authors: Chris Redl",
    "Published: October 17, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400256639.001",
    "Decomposition of GDP and its deflator into demand- and supply-driven components for 12 Asian countries, the US and Europe, following the forecast error-based methodology of Shapiro (2022).",
    "Extensions to Shapiro (2022) methodology:",
    "Lockdowns in 2020:",
    "Post-COVID recovery dynamics:",
    "Inflation surge in 2021-22:",
    "Keynesian supply shocks:",
    "Cross-country growth spillovers:",
    "Subject: COVID-19, Deflation, Economic theory, Financial sector policy and analysis, Health, Inflation, Prices, Spillovers, Supply shocks",
    "Keywords: Asia and Pacific, COVID-19, Deflation, Demand, demand and supply movement, demand and supply shock, Europe, GDP shock, Global, growth spillover, Inflation, inflation decomposition, Machine Learning, Spillovers, Supply, Supply shocks",
    "**Working Paper**"
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