{
  "title": "One Global Shock, Many Inflation Paths: Explaining Post-COVID Inflation Divergence",
  "publication": "IMF Working Papers, May 22, 2026",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2026/05/22/one-global-shock-many-inflation-paths-explaining-post-covid-inflation-divergence-576027",
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  "summary": "This paper investigates why the post-COVID inflation surge, though globally synchronized, led to widely divergent outcomes across countries.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Research question: Why did the post-COVID inflation surge, though globally synchronized, produce widely divergent outcomes across countries?\n- Scope:\n  - Cross-country regressions for 130 economies.\n  - Local projections methods for 70 advanced and emerging markets."
    },
    {
      "heading": "Methods",
      "content": "- Empirical approaches:\n  - Cross-country regressions covering 130 economies.\n  - Local projections for 70 advanced and emerging markets.\n- Focus areas: structural, institutional, and policy determinants of post-pandemic inflation dynamics."
    },
    {
      "heading": "Key Findings",
      "content": "- Primary drivers of cross-country variation:\n  - Historical inflation accounts for most of the cross-country variation in cumulative post-COVID inflation.\n  - The scale of domestic energy price shocks accounts for most of the cross-country variation in cumulative post-COVID inflation.\n- Limited explanatory power:\n  - Many frequently cited country-specific, macroeconomic fundamentals and institutional features exhibit limited power to explain cross-country variation.\n- Domestic policy responses:\n  - The association between post-COVID inflation and domestic policy responses is weak.\n  - Endogeneity complicates a clear causal interpretation of policy effects.\n- Pass-through dynamics:\n  - Pass-through from energy prices to headline inflation intensified markedly in the post-COVID period.\n  - This intensified pass-through is particularly notable in:\n    - Emerging markets.\n    - Non-inflation-targeting regimes.\n    - Countries that did not expand fossil fuel subsidies.\n- Implications on transmission:\n  - Findings highlight the asymmetric transmission of supply shocks.\n  - Credibility, historical inflation experience, and energy policy design are important in shaping inflation persistence."
    },
    {
      "heading": "Policy Implications and Recommendations",
      "content": "- Strengthen central bank credibility.\n- Anchor expectations to bolster resilience against future global supply disruptions.\n- Consider energy policy design, including the role of fossil fuel subsidies, given their interaction with pass-through dynamics.\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/2026/05/22/one-global-shock-many-inflation-paths-explaining-post-covid-inflation-divergence-576027"
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    "Authors: Patrick A. Imam, Tigran Poghosyan",
    "Published: May 22, 2026",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229045148.001",
    "Research question: Why did the post-COVID inflation surge, though globally synchronized, produce widely divergent outcomes across countries?",
    "Scope:",
    "Empirical approaches:",
    "Focus areas: structural, institutional, and policy determinants of post-pandemic inflation dynamics.",
    "Primary drivers of cross-country variation:",
    "Limited explanatory power:",
    "Domestic policy responses:",
    "Pass-through dynamics:",
    "Implications on transmission:",
    "Strengthen central bank credibility.",
    "Anchor expectations to bolster resilience against future global supply disruptions.",
    "Consider energy policy design, including the role of fossil fuel subsidies, given their interaction with pass-through dynamics.",
    "**Working Paper**"
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