UMD ECON Professor’s Inflation Analysis Captures Foreign & Domestic Attention
Neil Moskowitz Professor of Economics Sebnem Kalemli-Ozcan recently presented findings from her latest paper, “Global supply chain pressures, international trade and inflation,” at the European Central Bank’s 2022 Forum on Central Banking in Sintra, Portugal.
In keeping with the greatest takeaways from the paper—which she co-authored with Julian di Giovanni of New York Fed’s Research and Statistics Group, University of Maryland Department of Economics Ph.D. candidate Alvaro Silva, and Harvard University’s Muhammed Yildirim—she focused her discussion on what drove inflation in the United States and Europe in 2020 and 2021.
Supply chain bottlenecks caused by Covid-19 increased inflation in all countries, but was a bigger contributor to European inflation than inflation in the U.S. In the U.S. demand (60%) for goods played a greater role in driving up prices than supply-related issues (40%).
“The demand for goods played a higher role in the U.S., given the extent of fiscal stimulus and the fact that U.S.’s role is not as central as Europe’s in the global supply chain trade,” Kalemli-Ozcan explained.
Co-author di Giovanni published a late-summer blog post summarizing this and the researchers’ other findings, contributing to the paper's recent mentions in major news outlets that include The New York Times, The Wall Street Journal, Financial Times, and more.
“The early belief that the strong recovery in trade is going to mean we are going to get rid of these supply chain problems very quickly turned out to be misleading,” Kalemli-Ozcan said in the conclusion of her presentation. “In our model, as in any other model of monetary policy, monetary policy can tame inflation in a given county by contracting aggregate demand. However, there will remain upward pressure on price growth as long as global supply chain bottlenecks persist.”
View Professor Kalemli-Ozcan’s full presentation
Photo of Kalemli-Ozcan presenting at the European Central Bank’s 2022 Forum on Central Banking is by Sérgio Garcia
Published on Tue, Sep 6, 2022 - 9:51AM