Time-varying impact of supply chain pressures on US inflation

Abstract

ABSTRACT We estimate a time-varying parameter VAR with stochastic volatility (TVP-VAR-SV) model using the global supply chain pressure index (GSCPI) to study the variation of the supply chain impact on US inflation over time. We find the increasing impact of the global supply chain shock on inflation, which has become more persistent during the COVID-19 pandemic. The findings suggest that supply chains have become a more influential in understanding economic variables, especially inflation.