Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322330 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 12/2024
Publisher: 
Norges Bank, Oslo
Abstract: 
This paper demonstrates that inflation expectations have acted as significant amplifiers of recent global demand and supply shocks, thereby playing a crucial role in maintaining inflation at relatively high levels. This finding is established by applying a structural vector autoregression model that includes various shocks to global demand and supply, along with domestic inflation and inflation expectations for six economies: the United States, Canada, New Zealand, the Euro area, the United Kingdom, and Norway. We begin by documenting that global demand and supply shocks in the oil market, as well as global supply chain disruptions, have been major drivers of the recent inflation surge in all these economies. Subsequently, through various counterfactual and conditional forecasting exercises, we demonstrate that inflation expectations generally amplify the transmission of global shocks to inflation and have played a critical role in sustaining elevated inflation rates in recent years, particularly in the United States, Canada, and New Zealand.
Subjects: 
Inflation Expectations
Inflation Pass-through
Oil Prices
Supply Chain Pressures
JEL: 
E31
C11
C32
D84
Q41
Q43
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-332-1
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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