Date
The role of demand and supply factors in HICP inflation during the COVID-19 pandemic – a disaggregated perspective 0 / 0 x
Prepared by Derry O’Brien, Clémence Dumoncel and Eduardo Gonçalves
Introduction
The economic impact of the coronavirus (COVID-19) pandemic is not a standard textbook shock. Instead the shock is multidimensional, with sources on both the external and the domestic side, on both the demand and the supply side, and at both the aggregate and the sector-specific level. This poses challenges for the assessment of inflation. Established relationships between inflation and its determinants may not hold up or may not be scalable, given the magnitude of disturbances in product and labour markets. Moreover, the increasing emphasis of the inflation literature on distributions rather than point outcomes for future inflation is relevant for analysing the impact that the COVID-19 shock has had on inflation risks.