The scars of supply shocks: Implications for monetary policy
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- dc.contributor.author Fornaro, Luca
- dc.contributor.author Wolf, Martin
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2024-11-14T10:09:44Z
- dc.date.available 2024-11-14T10:09:44Z
- dc.date.issued 2020-10-01
- dc.date.modified 2024-11-14T10:07:19Z
- dc.description.abstract We study the effects of supply disruptions - for instance due to energy price shocks or the emergence of a pandemic - in an economy with Keynesian unemployment and endogenous productivity growth. By temporarily disrupting investment, negative supply shocks generate permanent output losses - or scarring effects. By inducing a negative wealth effect, scarring effects depress aggregate demand, which may even fall below the exogenous fall in supply. However, that scarring effects depress aggregate demand does not necessarily translate into low rates of ination. On the contrary, scarring effects may reinforce and prolong the inflationary impact of supply disruptions. A contractionary monetary policy response may end up deepening scarring effects and increasing inflation in the medium run. A successful disinflation may require a policy mix of monetary tightening and fiscal interventions aiming at supporting business investment and the economy's productive capacity.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1748
- dc.identifier.citation Journal of Monetary Economics, 140, 2023, 18-36
- dc.identifier.uri http://hdl.handle.net/10230/68590
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1748
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword energy shocks
- dc.subject.keyword hysteresis
- dc.subject.keyword investment
- dc.subject.keyword endogenous growth
- dc.subject.keyword inflation
- dc.subject.keyword covid-19
- dc.subject.keyword Macroeconomics and International Economics
- dc.title The scars of supply shocks: Implications for monetary policy
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper