The Macroeconomic Effects of Global Supply Chain Shocks

This paper provides evidence that global supply chain shocks are key drivers of business cycle fluctuations, introducing a novel identification strategy based on a narrative analysis of price surcharges from the three largest container shipping companies. Negative shocks cause a persistent rise in consumer prices and a prolonged decline in economic activity. Sectoral impacts vary with exposure to global supply chains, measured by the share of inputs sourced from abroad. Spillovers extend to non-tradable sectors. These shocks accounted for up to 45% of the post-pandemic inflation. Without monetary or fiscal stimulus, recovery would have taken 18 months longer.