Managing Inflation and Supply Chain Disruptions in the Global Economy

Abstract

The widespread impact of price instability issues in the world has originated in global financial problems for more than three decades, and the effect of wars on the price changes remained mostly local or regional. But today, the impact of price instabilities rooted in supply chain bottlenecks is broader and more persistent in nature. With this changing price instability structure, analyzing the interdependence in production among the countries and exploring their effect on countries' inflation levels has become crucial. With this motivation, the chapter examines these relations by the BVAR model. The interdependence of countries' own purchasing managers' index, representing the supply chain disruptions, and their impulse on the producer price index, representing the inflation, are captured by the BVARs. The chapter focuses on the cases of a group of specific economies and chooses three countries: Germany, the United States, and Turkey. The findings remark that these countries' inflation levels are associated with their major trading partners' supply chain disruptions.