Shipping Costs and Inflation

By Yan Carriere-Swallow, Pragyan Deb, Davide Furceri, Daniel Jimenez, Jonathan David Ostry

March 25, 2022

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Yan Carriere-Swallow, Pragyan Deb, Davide Furceri, Daniel Jimenez, and Jonathan David Ostry. Shipping Costs and Inflation, (USA: International Monetary Fund, 2022) accessed November 25, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The Covid-19 pandemic has disrupted global supply chains, leading to shipment delays and soaring shipping costs. We study the impact of shocks to global shipping costs—measured by the Baltic Dry Index (BDI)—on domestic prices for a large panel of countries during the period 1992-2021. We find that spikes in the BDI are followed by sizable and statistically significant increases in import prices, PPI, headline, and core inflation, as well as inflation expectations. The impact is similar in magnitude but more persistent than for shocks to global oil and food prices. The effects are more muted in countries where imports make up a smaller share of domestic consumption, and those with inflation targeting regimes and better anchored inflation expectations. The results are robust to several checks, including an instrumental variables approach in which we instrument changes in shipping costs with an indicator of closures of the Suez Canal.

Subject: Import prices, Inflation, Oil prices, Output gap, Prices, Producer prices, Production

Keywords: Baltics, Global, Import intensity, Import prices, Import share, Inflation, Inflation expectation, Inflation pass-through, Monetary policy., Oil prices, Output gap, Price shocks, Producer prices, Shipping cost

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/061
Stock No:

WPIEA2022061
ISBN:

9798400204685
ISSN:

1018-5941

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