Beyond Energy: Inflationary Effects of Metals Price Shocks in Production Networks
IMF Working Papers, October 22, 2024
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Bibliographic details
- Authors: Jorge Alberto Miranda Pinto, Andrea Pescatori, Martin Stuermer, Xueliang Wang
- Published: October 22, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400291630.001
Summary
- Authors: Jorge Alberto Miranda Pinto, Andrea Pescatori, Martin Stuermer, Xueliang Wang
- Date: October 22, 2024
- Series: Working Paper No. 2024/215
- Pages: 44
- Volume: 2024
- Issue: 215
- DOI: https://doi.org/10.5089/9798400291630.001
- Stock No: WPIEA2024215
- ISBN: 9798400291630
- ISSN: 1018-5941
- Core summary: Metals price shocks have significant and persistent effects on core and headline inflation, especially in countries highly exposed to metals in their production networks. This contrasts with oil supply shocks, which predominantly affect headline inflation. A shift towards higher relative metals intensity could cause commodity price shocks to increasingly influence core rather than headline inflation, making shocks less visible on impact but more persistent.
Methodology
- Theoretical approach: Production network model calibrated for various countries using input-output (I-O) tables.
- Empirical approach: Local projections to estimate how metal shocks influence inflation and to test country-level heterogeneity in sensitivity to those shocks.
Key Findings
- Metals price shocks have significant and persistent effects on both core and headline inflation.
- Effects are particularly pronounced in countries with high exposure to metals in their production networks.
- This behavior contrasts with oil supply shocks, which predominantly affect headline inflation.
- A global shift toward higher relative metals intensity associated with the energy transition could:
- Increase the influence of commodity price shocks on core inflation relative to headline inflation.
- Make commodity price shocks less visible on impact but more persistent over time.
Implications and Policy Recommendations
- Central banks should consider the changing role of metals in production networks when assessing inflation dynamics and inflation risks.
- Monitoring of metals exposure in production networks is important for understanding cross-country heterogeneity in inflation responses to commodity shocks.
- Anticipate that commodity shocks may become more persistent and less immediately visible in headline measures, implying potential adjustments to inflation monitoring and communication strategies.
Subjects and Keywords
- Subject: Commodities, Economic theory, Inflation, Metal prices, Metals, Prices, Supply shocks
- Keywords: core CPI inflation, GDP deflator, Global, inflation, inflation dynamics, International macroeconomics, Metal prices, metal shock, metals, metals price shock, price shock, production network model, production networks, Supply shocks, supply shocks
Source: IMF Working Papers — "Beyond Energy: Inflationary Effects of Metals Price Shocks in Production Networks", Jorge Alberto Miranda Pinto, Andrea Pescatori, Martin Stuermer, Xueliang Wang, October 22, 2024; Working Paper No. 2024/215; DOI: https://doi.org/10.5089/9798400291630.001
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