Global drivers of inflation: The role of supply chain disruptions and commodity price shocks

The determinants of inflation rates have been extensively studied with no clear consensus. Recent research highlights the growing influence of global supply factors, notably supply chain disruptions and commodity price shocks. This paper analyzes the changing impact of these global supply chain disruptions and commodity price shocks, compared to demand shocks, on inflation rates in Germany, Japan, the U.K., and the U.S. from 1998 to 2022. The findings reveal that since the mid-2010s, supply shocks have become the predominant drivers of inflation. After the Global Financial Crisis, commodity price shocks significantly affected inflation in Germany, the U.K., and the U.S., while the influence of global supply chain disruptions on inflation in all four countries surged following the COVID-19 pandemic. • We disentangle the effects of demand and supply shocks on inflation rates. • Global supply shocks have emerged as primary drivers of inflation since the mid-2010s. • Commodity prices have played a major role in explaining inflation in recent years. • Supply chain disruptions have become more critical during and after the pandemic. • Germany and the U.S. face the highest inflation risks due to rising energy prices.