Peter Tillmann (University of Giessen) - The Macroeconomic Effects of Global Supply Chain Disruptions
Co-author: David Finck (University of Giessen)
Highly interconnected global supply chains make countries vulnerable to supply chain disruptions. In this paper, we estimate the macroeconomic effects of global supply chain shocks for the euro area. Our empirical model combines business cycle variables with data from international container trade. To achieve identification, we augment conventional sign restrictions on the impulse responses by narrative information about three episodes: the Tohoku earthquake in 2011, the Suez Canal obstruction in 2021 and the Shanghai lockdown in 2022. We show that a global supply chain shock causes a drop in euro area real economic activity and a strong increase in prices. Over a horizon of one year, the global supply chain shock explains about 15% of inflation dynamics. We also use regional shipping variables to isolate shocks originating in China. Our results imply that supply chain disruptions originating in China are an important driver for the dynamics prices and industrial production, especially since the outbreak of the pandemic.
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